Patentee brought action against competitors alleging infringement of patent directed toward disposable bloodglucose test strips for diabetes management. The United States District Court for the Northern District of California,Martin J.Jenkins, J.,560 F.Supp.2d 835,

amounts to gross negligence or negligence under a “should have known”standard does not satisfy the inequitable conduct intent requirement, abrogatingDriscoll v. Cebalo,

731 F.2d 878, 885

andOrthopedic Equip. Co., Inc. v. All Orthopedic Appliances, Inc.,

707 F.2d 1376;

2

a district court should not use a “sliding scale,” where a weak showing of intent may be found sufficient for inequitableconduct based on a strong showing of materiality, and vice versa, abrogatingAm. Hoist & Derrick Co. v. Sowa & Sons, Inc.,

725 F.2d 1350;

3

a district court may not infer intent solely from materiality, but, instead, a court must weigh the evidence of intent to deceiveindependent of its analysis of materiality;

4

to meet the clear and convincing evidence standard, the specific intent to deceive must be the single most reasonable inferenceable to be drawn from the evidence;

5

when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found;

6

the patentee need not offer any good faith explanation unless the accused infringer first proves a threshold level of intenttodeceive by clear and convincing evidence;

7

the materiality required to establish inequitable conduct is but-for materiality; and

8

remand was required.

Affirmed in part, vacated in part, and remanded.

O’Malley, Circuit Judge, filed opinion concurring in part and dissenting in part.

Robert A. Armitage, Eli Lilly and Company, of Indianapolis, IN, for amici curiae 43 Patent Practitioners Employed by Eli Lillyand Company on rehearing en banc. With him on the brief wereJames J. Kelley

andMark J. Stewart.

Christopher E. Chalsen, Milbank, Tweed, Hadley & McCloy LLP, of New York NY, for amicus curiae The AmericanIntellectual Property Law Association on rehearing en banc. With him on the brief wereLawrence T. Kass

andNathaniel T.Browand. Of counsel on the brief wasAlan J. Kasper, American Intellectual Property Law Association, of Arlington, VA.

Jeffrey M. Samuels, University of Akron School of Law, Akron, OH, for amicus curiae The University of Akron School of Lawon rehearing en banc. With him on the brief wasRobert C. Kahrl.

Jeffrey D. Mills, King & Spalding LLP, of Austin, TX, for amicus curiae Association of Citizens for Patent Protection in thePublic Interest on rehearing en banc. With him on the brief wasBrian C. Banner.

involves disposable blood glucose test strips for diabetes management. These strips employ electrochemicalsensors to measure the level of glucose in a sample of blood. When blood contacts a test strip, glucose in the blood reacts withan enzyme on the strip, resulting in the transfer of electrons from

the glucose to the enzyme. A mediator transfers theseelectrons to an electrode on the strip. Then, the electrons flow from the strip to a glucose meter, which calculates the glucoseconcentration based on the electrical current.

The ′551 patent

claims a test strip with an electrochemical sensor for testing whole blood without a membrane over theelectrode:

1. A single use disposable electrode strip for attachment to the signal readout circuitry of a sensor to detect a currentrepresentative of the concentration of a compound in a drop of a whole blood sample comprising:

a) an elongated support having a substantially flat, planar surface, adapted for releasable attachment to said readout circuitry;

b) a first conductor extending along said surface and comprising a conductive element for connection to said readoutcircuitry;

c) an active electrode on said strip in electrical contact with said first conductor and positioned to contact said whole bloodsample;

d) a second conductor extending along said surface comprising a conductive element for connection to said read outcircuitry; and

e) a reference counterelectrode in electrical contact with said second conductor and positioned to contact said whole bloodsample,

wherein said active electrode is configured to be exposed to said whole blood sample without an intervening membrane orother whole blood filtering member

....

*1283

′551 patent

col. 13 l.29–col. 14 l.3 (emphasis added). “Whole blood,” an important term in the claim, means blood thatcontains all of its components, including red blood cells.

In the prior art, some sensors employed diffusion-limiting membranesto control the flow of glucose to the electrode becausethe slower mediators of the time could not deal with a rapid influx of glucose. Other prior art sensors used protectivemembranes to prevent “fouling.” Fouling occurs when red blood cells stick to the

active electrode and interfere with electrontransfer to the electrode. Protective membranes permit glucose molecules to pass, but not red blood cells.

Abbott filed the original application leading to the ′551 patent

in 1984. Over thirteen years, that original application sawmultiple rejections for anticipation and obviousness, including repeated rejections overU.S. Patent No. 4,545,382 (“the ′382patent”), another patent owned by Abbott. The ′382 patent

specification discussed protective membranes in the followingterms: “Optionally, but preferably when being used on live blood, a protective membrane surrounds

both the enzyme and themediator layers, permeable to water and glucose molecules.” Col.4 ll.63–66. “Live blood” refers to blood within a body.

In 1997, Lawrence Pope, Abbott’s patent attorney, and Dr. Gordon Sanghera, Abbott’s Director of Research and Development,studied the novel features of their application and decided to present a new reason for a patent. Pope presented new claims to theexaminer based on a new sensor that did not require a protective membrane for whole blood. Pope asserted that this

would overcome the prior art ′382 patent, whose electrodes allegedly required a protective membrane. The examiner requestedan affidavit to show that the prior art required a membrane for whole blood at the time of the invention.

To meet this evidentiary request, Dr. Sanghera submitted a declaration to the U.S. Patent and Trademark Office (“PTO”)stating:

[O]ne skilled in the art would have felt that an active electrode comprising an enzyme and a mediator would require aprotective membrane if it were to be used with a whole blood sample.... [O]ne skilled in the art would not read lines 63 to 65of column 4 ofU.S. Patent No. 4,545,382

to teach that the use of a protective membrane with a whole blood sample isoptionally or merely preferred.

J.A. 7637. Pope, in submitting Sanghera’s affidavit, represented:

The art continued to believe [following the ′382 patent] that a barrier layer for [a] whole blood sample was necessary....

One skilled in the art wouldnot

have read the disclosure of the [′382 patent] as teaching that the use of a protective membranewith whole blood samples was optional. He would not, especially in view of the working examples, have read the“optionally, but preferably” language at line 63 of column [4] as a technical teaching but rather mere patent phraseology.

....

There is no teaching or suggestion of unprotected active electrodes for use with whole blood specimens in [the ′382 patent]....

J.A. 7645–46.

Several years earlier, while

prosecuting the European counterpart to the ′382 patent, European Patent EP 0 078 636 (“EP′636”), Abbott made representations to the European Patent Office (“EPO”) regarding the same “optionally, but preferably”language in the European specification.*1284

On January 12, 1994, to distinguish a German reference labeled D1, whichrequired a diffusion-limiting membrane, Abbott’s European patent counsel argued that their invention did not require adiffusion-limiting membrane:

Contrary to the semipermeable membrane of D1, the protective membrane optionally utilized with the glucose sensor of thepatent is [sic] suit is not controlling the permeability of the substrate

.... Rather, in accordance with column 5, lines 30 to 33of the patent in suit:

“Optionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and themediator layers, permeable to water and glucose molecules.”

See also claim 10 of the patent in suit as granted according to which the sensor electrode has an outermost protectivemembrane (11) permeable to water and glucose molecules.... Accordingly,the purpose of the protective membrane of thepatent in suit, preferably to be used with in vivo measurements, is a safety measurement to prevent any course [sic] particlescoming off during use but not a permeability control for the substrate.

J.A. 6530–31 (emphases added).

On May 23, 1995, Abbott’s European patent counsel submitted another explanation about the D1 reference and EP ′636.

“Optionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and themediator layers, permeable to water and glucose molecules.”

It is submitted that this disclosure is unequivocally clear. The protective membrane is optional, however,

it is preferred whenused on live blood in order to prevent the larger constituents of the blood, in particular erythrocytes from interfering with

theelectrode sensor. Furthermore it is said, that said protective membrane should not prevent the glucose molecules frompenetration, the membrane is “permeable” to glucose molecules.

This teaches the skilled artisan that, whereas the [D1membrane] must ... control the permeability of the glucose ... the purpose of the protective membrane in the patent in suitisASD

not to control the permeation of the glucose molecules. For this very reasonthe sensor electrode as claimed does not have(and must not have) a semipermeable membrane in the sense of D1.

J.A. 6585 (first and third emphases added).

II

In March 2004, Becton, Dickinson and Co. (“Becton”) sued Abbott in the District of Massachusetts seeking a declaratoryjudgment of noninfringement ofU.S. Patent Nos. 6,143,164 (“the ′164 patent”)

and

6,592,745 (“the ′745 patent”). Becton’sproduct was a blood glucose test strip, the BD Test Strip. Abbott countersued Becton in the Northern District of Californiaalleging that Becton’s strip infringed the ′164, ′745, and ′551 patents. The District of Massachusetts then transferred its case tothe Northern District of California. Abbott then sued Nova Biomedical Corp. (“Nova”), Becton’s supplier, alleginginfringement of the patents asserted in Abbott’s suit against Becton. In August 2005, Abbott also sued Bayer Healthcare LLC(“Bayer”), alleging that its Microfill and Autodisc blood glucose strips infringed the ′551 and ′745 patents. The NorthernDistrict of California consolidated all of the cases.

The district court granted summary judgment of noninfringement of all asserted claims in the ′164 and ′745 patents.Therasense, Inc. v. Becton, Dickinson & Co.,

560 F.Supp.2d 835, 854, 880 (N.D.Cal.2008). The district court also found nearly*1285

all of the asserted claimsof the ′745 patent

invalid due to anticipation.Id.

at 880.

Following a bench trial, the district court determined that claims 1–4 of the ′551 patent

were invalid due to obviousness in lightof the ′382 patent

andU.S. Patent No. 4,225,410 (“the ′410 patent”).Trial Opinion

at 1127. The central issue for obviousnesswaswhether the prior art would have disclosed a glucose sensor without a membrane for whole blood to a person of ordinaryskill in the art. The district court found that the ′382 patent

disclosed sensors in which “a protective membrane was optional inall cases except the case of live blood, in which case the protective membrane was preferred—but not required.”Id.

at1103.

Ofprimary relevance here, the district court held the ′551 patent

unenforceable for inequitable conduct because Abbott did notdisclose to the PTO its briefs to the EPO filed on January 12, 1994 and May 23, 1995.Id.

Recognizing the problems created by the expansion and overuse of the inequitable conduct doctrine, this court granted Abbott’spetition for rehearing en banc and vacated the judgment of the panel.Therasense,

374 Fed.Appx. at 35.

This court now vacatesthe district court’s inequitable conduct judgment and remands.

III

1

Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent. Thisjudge-made doctrine evolved from a trio of Supreme Court cases that applied the doctrine of unclean hands to dismiss patentcases involving egregious misconduct:Keystone Driller Co. v. General Excavator Co.,

involved the manufacture and suppression of evidence.290 U.S. at 243, 54 S.Ct. 146.

The patentee knew of “apossible prior use” by a third party prior to filing a patent application but did not inform the PTO.Id.

at 243, 54 S.Ct. 146.

Afterthe issuance of the patent, the patentee paid the prior user to sign a false affidavit stating that his use was an abandonedexperiment and bought his agreement to keep secret the details of the prior use and to suppress evidence.Id.

With thesepreparations in place, the patentee then asserted this patent, along with two other patents, against Byers Machine Co. (“Byers”).Keystone Driller Co. v. Byers Mach. Co.,

4 F.Supp. 159 (N.D.Ohio 1929). Unaware of the prior use and of the cover-up, thecourt held the patents valid and infringed and granted an injunction.Id.

The patentee then asserted the same patents against General Excavator Co. and Osgood Co. and sought a temporary injunctionbased on the decree in the previous Byers case.Keystone,

290 U.S. at 242, 54 S.Ct. 146.

The district court denied the injunctionsbut made the defendants post bonds.Id.

The defendants discovered and introduced evidence of the*1286

corrupt transactionbetween the patentee and the prior user.Id.

at 243–44, 54 S.Ct. 146.

The district court declined to dismiss these cases forunclean hands.Id.

On appeal, the Sixth Circuit reversed and remanded with instructions to dismiss the complaints.Id.

TheSupreme Court affirmed.Id.

at 247, 54 S.Ct. 146.

The Supreme Court explained that if the corrupt transaction between the patentee and the prior user had been discovered in theprevious Byers case, “the court undoubtedly would have been warranted in holding it sufficient to require dismissal of the causeof action.”Id.

at 246, 54 S.Ct. 146.

Because the patentee used the Byers decree to seek an injunction in the cases againstGeneral Excavator Co. and Osgood Co., it did not come to the court with clean hands, and dismissal of these cases wasappropriate.Id.

at 247, 54 S.Ct. 146.

LikeKeystone,

Hazel–Atlas

involved both the manufacture and suppression of evidence.322 U.S. at 240, 64 S.Ct. 997.

Facedwith “apparently insurmountable Patent Office opposition,” the patentee’s attorneys wrote an article describing the invention asa remarkable advance in the art and had William Clarke, a well-known expert, sign it as his own and publish it in a trade journal.Id.

After the patentee submitted the Clarke article to the PTO in support of its application, the PTO allowed a patent to issue.Id.

On appeal, the patentee’s attorneys emphasized the Clarke article, andthe Third Circuit reversed the district court’s judgment, holding the patent valid and infringed.Id.

The patentee then went togreat lengths to conceal the false authorship of the Clarke article, contacting Clarke multiple times, including before and afterHazel–Atlas’s investigators spoke to him.Id.

at 242–43, 64 S.Ct. 997.

After Hazel–Atlas settled with the patentee, the patenteepaid Clarke a total of $8,000.Id.

These facts surfaced in a later suit,United States v. Hartford–Empire Co.,

46 F.Supp. 541(N.D.Ohio 1942).Hazel–Atlas,

322 U.S. at 243, 64 S.Ct. 997.

On the basis of these newly-discovered facts, Hazel–Atlas petitioned the Third Circuit to vacate its judgment, but the courtrefused.Id.

at 243–44, 64 S.Ct. 997.

The Supreme Court reversed.Id.

at 251, 64 S.Ct. 997.

The Supreme Court explained that ifthe district court had learned of the patentee’s deception before the PTO, it would have been warranted in dismissing thepatentee’s case under the doctrine of unclean hands.Id.

at 250, 64 S.Ct. 997.

Likewise, had the Third Circuit learned of thepatentee’s suppression of evidence, it also could have dismissed the appeal.Id.

Accordingly, the Supreme Court vacated thejudgment against Hazel–Atlas and reinstated the original judgment dismissing the patentee’s case.Id.

at 251, 64 S.Ct. 997.

InPrecision,

the patentee suppressed evidenceof perjury before the PTO and attempted to enforce the perjury-tainted patent.324 U.S. at 816–20, 65 S.Ct. 993.

The PTO had declared an interference between two patent applications, one filed by Larsonand the other by Zimmerman.Id.

Larson filed his preliminary statement in the PTO proceedings with false dates of conception,disclosure, drawing, description, and reduction to practice. Later, he testified in support of these false dates in an interferenceproceeding.Id.

at 809–10, 65 S.Ct. 993.

Automotive discovered this perjury but did not reveal this information to the PTO.*1287

Id.

at 818, 65 S.Ct. 993.

Instead,Automotive entered into a private settlement with Larson that gave Automotive the rights to the Larson application andsuppressed evidence of Larson’s perjury.Id.

at 813–14, 65 S.Ct. 993.

Automotive eventually received patents on both theLarson and Zimmerman applications.Id.

at 814, 65 S.Ct. 993.

Despite knowing that the Larson patent was tainted with perjury,Automotive sought to enforce it against others.Id.

at 807, 65 S.Ct. 993.

The district court found that Automotive had unclean hands and dismissed the suit.Id.

at 808, 65 S.Ct. 993.

The Seventh Circuitreversed.Id.

The Supreme Court reversed the Seventh Circuit’s decision, explaining that dismissal was warranted because notonly had

the patentee failed to disclose its knowledge of perjury to the PTO, it had actively suppressed evidence of the perjuryand magnified its effects.Id.

at 818–19, 65 S.Ct. 993.

IV

The unclean hands cases ofKeystone,

Hazel–Atlas,

andPrecision

formed the basis for a new doctrine of inequitable conductthat developed and evolved over time. Each of these unclean hands cases before the Supreme Court dealt with particularlyegregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence.SeePrecision,

Moreover, they all involved “deliberately planned and carefully executed scheme[s] to defraud” not only the PTO but also thecourts.Hazel–Atlas,

322 U.S. at 245, 64 S.Ct. 997.

As the inequitable conduct doctrine evolved from these unclean hands cases,it came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended todeceive both the PTO and the courts but also the mere nondisclosure of information to the PTO. Inequitable conduct alsodiverged from the doctrine of unclean hands by adopting a different and more potent remedy—unenforceability of the entirepatent rather than mere dismissal of theinstant suit.SeePrecision,

324 U.S. at 819, 65 S.Ct. 993

(dismissing suit);Hazel–Atlas,

322 U.S. at 251, 64 S.Ct. 997

(noting that the remedy was limited to dismissal and did not render the patent unenforceable);Keystone,

290 U.S. at 247, 54 S.Ct. 146

(affirming dismissal of suit).

In line with this wider scope and stronger remedy, inequitable conduct came to requirea finding of both intent to deceive andmateriality.Star Scientific Inc. v. R.J. Reynolds Tobacco Co.,

537 F.3d 1357, 1365 (Fed.Cir.2008). To prevail on the defense ofinequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information withthe specific intent to deceive the PTO.Id.

The accused infringer must prove both elements—intent and materiality—by clearand convincing evidence.Id.

If the accused infringer meets its burden, then the district court must weigh the equities todetermine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable.Id.

This court recognizes that the early unclean hands cases do not present any standard for materiality. Needless to say, this court’sdevelopment of a materiality requirement for inequitable conduct does not (and cannot) supplant Supreme Court precedent.Though inequitable conduct developed from these cases, the unclean hands doctrine remains available to supply a remedy foregregious misconduct like that in the Supreme Court cases.

As inequitable conduct emerged from unclean hands, the standards for intent to deceive and materiality have fluctuated overtime. In the past, this court has*1288

espoused low standards for meeting the intent requirement, finding it satisfied based ongross negligence or even negligence.SeeDriscoll v. Cebalo,

731 F.2d 878, 885 (Fed.Cir.1984)

(“Where they knew, or shouldhave known, that the withheld

reference would be material to the PTO’s consideration, their failure to disclose the reference issufficient proof of the existence of an intent to mislead the PTO.”);Orthopedic Equip. Co., Inc. v. All Orthopedic Appliances,Inc.,

707 F.2d 1376, 1383–84 (Fed.Cir.1983)

(requiring only gross negligence to sustain a finding of intent). This court has alsopreviously adopted a broad view of materiality, using a “reasonable examiner” standard based on the PTO’s 1977 amendmentto Rule 56.SeeAm. Hoist & Derrick Co. v. Sowa & Sons, Inc.,

725 F.2d 1350,1362 (Fed.Cir.1984);see also

37 C.F.R. § 1.56(1977)

(a reference is material if “there is a substantial likelihood that a reasonable examiner would consider it important indeciding whether to allow the application to issue as a patent”). Further weakening the showing needed to establish inequitableconduct, this court then placed intent and materiality together on a “sliding scale.”Am. Hoist,

725 F.2d at 1362.

Thismodification to the inequitable conduct doctrine held patents unenforceable based on a reduced

showing of intent if the recordcontained a strong showing of materiality, and vice versa. In effect, this change conflated, and diluted, the standards for bothintent and materiality.

This court embraced these reduced standards for intent and materiality

to foster full disclosure to the PTO.Seeid.

at 1363.

Thisnew focus on encouraging disclosure has had numerous unforeseen and unintended consequences. Most prominently,inequitable conduct has become a significant litigation strategy. A charge of inequitable conduct conveniently expandsdiscovery into corporate practices before patent filing and disqualifies the prosecuting attorney from the patentee’s litigationteam.See

Stephen A. Merrill et al., Nat’l Research Council of the Nat’l Academies,A Patent System for the 21st Century

122(2004). Moreover, inequitable conduct charges cast a dark cloud over the patent’s validity and paint the patentee as a bad actor.Because the doctrine focuses on the moral turpitude of the patentee with ruinous consequences for the reputation of his patentattorney, it discourages settlement and deflects attention from the merits of validity and infringement issues. CommitteePosition Paper,The Doctrine of Inequitable Conduct and the Duty of Candor in Patent Prosecution: Its Current AdverseImpact on the Operation of the United States Patent System,

16 AIPLA Q.J. 74, 75 (1988). Inequitable conduct disputes also“increas[e] the complexity, duration and cost of patent infringement litigation that is already notorious for its complexityandhigh cost.” Brief and Appendix of the American Bar Ass’n as Amicus Curiae at 9.

2

3

4

Perhaps most importantly, the remedy for inequitable conduct is the “atomic bomb” of patent law.Aventis Pharma S.A. v.Amphastar Pharm., Inc.,

48 F.3d1172, 1182 (Fed.Cir.1995). Moreover, the taint of a finding of inequitable conduct can spread from a single patent to renderunenforceable other related patents and applications in the same technology family.See, e.g.,Consol. Aluminum*1289

267 F.3d 1370, 1380 (Fed.Cir.2001). A finding of inequitableconduct may also prove the crime or fraud exception to the attorney-client privilege.SeeIn re Spalding Sports Worldwide, Inc.,

203 F.3d 800, 807 (Fed.Cir.2000).

With these far-reaching consequences, it is no wonder that charging inequitable conduct has become a common litigation tactic.One study estimated that eighty percent of patent infringement cases included allegations of inequitable conduct. CommitteePosition Paper at 75;see also

Christian Mammen,Controlling the “Plague”: Reforming the Doctrine of Inequitable Conduct,

745 F.2d 1437, 1454 (Fed.Cir.1984).“[T]he habit of charging inequitable conduct in almost every major patent case has become an absolute plague. Reputablelawyers seem to feel compelled to make the charge against other reputable lawyers on the slenderest grounds, to represent theirclient’s interests adequately, perhaps.”Burlington Indus., Inc. v. Dayco Corp.,

Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system. Becauseallegations of inequitable conduct are routinely brought on “the slenderest grounds,”Burlington Indus.,

849 F.2d at 1422,

patent prosecutors constantly confront the specter of inequitable conduct charges. With inequitable conduct casting the shadowof a hangman’s noose, it is unsurprising that patent prosecutors regularly bury PTO examiners with a deluge of prior artreferences, most of which have marginal value.See

Brief for the United States as Amicus Curiae at 17 (submission of ninehundred references without any indication which ones were most relevant); Brief of the Biotechnology Industry Organizationas Amicus Curiae at 7 (submission of eighteen pages of cited references, including five pages listing references to claims, officeactions, declarations, amendments, interview summaries, and other communications in related applications). “Applicantsdisclose too much prior art for the PTO to meaningfully consider, and do not explain its significance, all out offear that to dootherwise risks a claim of inequitable conduct.” ABA Section of Intellectual Property Law,A Section White Paper: Agenda for21st Century Patent Reform

2 (2009). This tidal wave of disclosure makes identifying the most relevant prior art more difficult.See

Brief for the United States as Amicus Curiae at 1 (submission of “large numbers of prior art references of questionablemateriality*1290

... harms the effectiveness of the examination process”). “This flood of information strains theagency’sexamining resources and directly contributes to the backlog.”Id.

at 17–18.

While honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintendedconsequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts,strained PTOresources, increased PTO backlog, and impaired patent quality. This court now tightens the standards for findingboth intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.

V

7

8

To prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intentto deceive the PTO.Star,

537 F.3d at 1366

(citingKingsdown,

863 F.2d at 876).

A finding that the misrepresentation oromission amounts to gross negligence or negligence under a “should have known” standard does not satisfy this intentrequirement.Kingsdown,

(emphases added). In other words, the accused infringer must prove by clear and convincing evidence that the applicant knewof the reference, knew that it was material, and made a deliberate decision to withhold it.

This requirement of knowledge and deliberate action has origins in the trio of Supreme Court cases that set in motion thedevelopment of the inequitable conduct doctrine. In each of those cases, the patentee acted knowingly and deliberately with thepurpose of defrauding the PTO and the courts.SeePrecision,

323 F.3d 1354, 1359(Fed.Cir.2003). A district court should not use a “sliding scale,” where a weak showing of intent may be found sufficient basedon a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality.Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that theapplicant knew of a reference, should have known of its materiality, and decided not to submit itto the PTO does not provespecific intent to deceive.SeeStar,

537 F.3d at 1366

(“the fact that information later found material was not disclosed cannot,by itself, satisfy the deceptive intent element of inequitable conduct”).

12

13

14

Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantialevidence.Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd.,

559 F.3d 1317, 1340 (Fed.Cir.2009). However, to meet theclear and convincing evidence standard, the specific intent to deceive must be “the single most reasonable inference able tobedrawn from the evidence.”Star,

537 F.3d at 1366.

Indeed, the evidence “must be sufficient torequire

a finding of deceitfulintent in the light of all the circumstances.”Kingsdown,

863 F.2d at 873

(emphasis added). Hence, when there are multiplereasonable inferences that may be drawn, intent to deceive cannot be*1291

found.SeeScanner Techs. Corp. v.ICOS VisionSys. Corp.,

528 F.3d 1365, 1376 (Fed.Cir.2008)

(“Whenever evidence proffered to show either materiality or intent issusceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another

Because the party alleging inequitable conduct bears the burden of proof, the “patentee need not offer any good faithexplanation unless the accused infringer first ... prove[s] a threshold level of intent to deceive by clear and convincingevidence.”Star,

537 F.3d at 1368.

The absence of a good faith explanation for withholding a material reference does not, byitself, prove intent to deceive.

VI

In the past, this court has tried to address the proliferation of inequitable conduct charges by raising the intent standardalone. InKingsdown,

this court made clear that gross negligence alone was not enough to justify an inference of intent to deceive.863F.2d at 876.

(emphasis added). This higher intent standard, standing alone, did not reduce the number of inequitableconduct cases before the courts and did not cure the problem of overdisclosure of marginally relevant prior art to the PTO. Toaddress these concerns, this court adjusts as well the standard for materiality.

InCorona Cord Tire Co. v. Dovan Chemical Corp.,

the Supreme Court considered the materiality of a patentee’smisrepresentation to the PTO.276 U.S. 358, 373–74, 48 S.Ct. 380, 72 L.Ed. 610 (1928). The patentee had submitted twoaffidavits, falsely claiming that the invention had been used in the production of rubber goods when in fact only test slabsofrubber had been produced.Id.

Because the misrepresentation was not the but-for cause of the patent’s issuance, the Court heldthat it was immaterial and refused to extinguish the patent’s presumption of validity:

Production of rubber goods for use or sale was not indispensable to the granting of the patent. Hence the affidavits, thoughperhaps reckless, were not the basis for it or essentially material to its issue. The reasonable presumption of validity furnishedASD

by the grant of the patent, therefore, would not seem to be destroyed.

Id.

at 374, 48 S.Ct. 380.

AlthoughCorona Cord

does not address unclean hands, the precursor to inequitable conduct, itdemonstrates the Court’s unwillingness to extinguish the statutory presumption of validity where the patentee made amisrepresentation to the PTO that did not affect the issuance of the patent.Corona Cord

thus supports a but-for materialitystandard for inequitable conduct, particularly giventhat the severe remedy of unenforceability for inequitable conduct farexceeds the mere removal of a presumption of validity.

16

17

18

This court holds that, as a general matter, the materiality required to establish inequitable conduct is but-formateriality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not haveallowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference,thecourt must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. Inmaking this patentability determination, the court should apply the preponderance*1292

of the evidence standard and giveclaims their broadest reasonable construction.See

Manual of Patent Examining Procedure (“MPEP”) §§ 706, 2111 (8th ed.Rev.8, July 2010).Often the patentability of a claim will be congruent with the validity determination—if a claim is properlyinvalidated in district court based on the deliberately withheld reference, then that reference is necessarily material because afinding of invalidity in a district court requires clear and convincing evidence, a higher evidentiary burden than that used inprosecution at the PTO. However, even if a district court does not invalidate a claim based on a deliberately withheld reference,the reference may be material if it would have blocked patent issuance under the PTO’s different evidentiary standards.See

As an equitable doctrine, inequitable conduct hinges on basic fairness. “[T]he remedy imposed by a court of equityshould be commensurate with the violation.”Columbus Bd. of Educ. v. Penick,

443 U.S. 449, 465, 99 S.Ct. 2941, 61 L.Ed.2d666 (1979). Becauseinequitable conduct renders an entire patent (or even a patent family) unenforceable, as a general rule, thisdoctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving anunwarranted claim.See

Star,

537 F.3d at 1366

(“[j]ust as it is inequitable to permit a patentee who obtained his patent throughdeliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable tostrike down an entire patent where the patentee committed only minor missteps or acted with minimal culpability”). After all,the patentee obtains no advantage from misconduct if the patent would have issued anyway.SeeKeystone,

290 U.S. at 245, 54S.Ct. 146

(“The equitable powers of the court can never be exerted in behalf of one ... who

by deceit or any unfair means hasgained an advantage.”) (emphasis added) (internal citations omitted). Moreover, enforcement of an otherwise valid patent doesnot injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to thepatent’s issuance.

21

22

Although but-for materiality generally must be proved to satisfy the materiality prong of inequitable conduct, thiscourtrecognizes an exception in cases of affirmative egregious misconduct. This exception to the general rule requiring but-for proofincorporates elements of the early unclean hands cases before the Supreme Court, which dealt with “deliberately planned andcarefully executed scheme[s]” to defraud the PTO and the courts.Hazel–Atlas,

322 U.S. at 245, 64 S.Ct. 997.

When thepatentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, themisconduct is material.SeeRohm & Haas Co. v. Crystal Chem. Co.,

722 F.2d 1556, 1571 (Fed.Cir.1983)

(“there is no room toargue that submission of false affidavits is not material”);see alsoRefac Int’l, Ltd. v. Lotus Dev. Corp.,

81 F.3d 1576, 1583(Fed.Cir.1996)

(finding the intentional omission of declarant’s employment with inventor’s company rendered the affidavitfalse and that “[a]ffidavits are inherently material”). After all, a patentee is unlikely to go to great lengths to deceive the PTOwith a falsehood unless it believes that the falsehood will affect issuance of the patent.Seeid.

at 247, 64 S.Ct. 997

(pointing outthat patentee’s lawyers “went to considerable trouble and expense” to manufacture false evidence because they believed it was

needed to obtain issuance of the patent). Because neither mere nondisclosure of prior art references to the PTO nor

failure tomention*1293

prior art references in an affidavit constitutes affirmative egregious misconduct, claims of inequitable conductthat are based on such omissions require proof of but-for materiality. By creating an exception to punish affirmative

egregiousacts without penalizing the failure to disclose information that would not have changed the issuance decision, this court strikesa necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitableconduct.

The concurrence mischaracterizes this exception for affirmative egregious acts by limiting it to the example provided—thefiling of an unmistakably false affidavit. Based on this misunderstanding, the concurrence asserts that this court’s test for

materiality is unduly rigid and contrary to Supreme Court precedent. In actuality, however, the materiality standard set forth inthis opinion includes an exception for affirmative acts of egregious misconduct, not just the filing of false affidavits.Accordingly, the general rule requiring but-for materiality provides clear guidance to patent practitioners and courts, while theegregious misconduct exception gives the test sufficient flexibility to capture extraordinary circumstances. Thus, not only isthis court’s approach sensitive to varied facts and equitable considerations, it is also consistent with the early unclean handscases—all of which dealt with egregious misconduct.SeePrecision,

324 U.S. at 816–20, 65 S.Ct. 993

(perjury and suppressionof evidence);Hazel–Atlas,

322 U.S. at 240, 64 S.Ct. 997

(manufacture and suppression of evidence);Keystone,

290 U.S. at 243,54 S.Ct. 146

(bribery and suppression of evidence).

The concurrence appears to eschew the use ofany

test because, by definition, under any test for materiality, a district courtcould not find inequitable conduct in cases “where the conduct in question would not be defined as such [under the test].”Although equitable doctrines require some measure of flexibility, abandoning the use of tests entirely is contrary to bothlongstanding practice and Supreme Court precedent. Courts have long applied rules and tests in determining whether aparticular factual situation falls within the scope of an equitable doctrine.See, e.g.,Winter v. Natural Res. Def. Council, Inc.,

(“the test of laches”requires both unreasonable delay and consequent prejudice). Moreover, the Supreme Court has made clear that such tests servean important purpose in limiting the discretion of district courts.

[C]ourts of equity must be governed by rules and precedents no less than the courts of law ... [because] the alternative is touse each equity chancellor’s conscience as a measure ofequity, which alternative would be as arbitrary and uncertain asmeasuring distance by the length of each chancellor’s foot....

(internal quotations omitted). This courttherefore rejects the view that its test—albeit flexible enough to capture varying manifestations of egregious and abusiveconduct—is inappropriate in the context of the way inequitable conduct has metastasized.

23

This court does not adopt the definition of materiality in PTO Rule 56. As*1294

an initial matter, this court is not bound bythe definition of materiality in PTO rules.SeeMerck & Co., Inc. v. Kessler,

80 F.3d 1543, 1549–50 (Fed.Cir.1996)

(“[T]hebroadest of the PTO’s rulemaking powers ... does NOT grant the Commissioner the authority to issue substantive rules.”);seealso

57 Fed.Reg.2021 (Jan. 17, 1992)

(The PTO stated that Rule 56 “do[es] not define fraud or inequitable conduct.”). Whilethis court respects the PTO’s knowledge in its area of expertise, the routine invocation of inequitable conduct in patent litigationhas had adverse ramifications beyond its effect on the

PTO. As discussed above, patent prosecutors, inventors, courts, and thepublic at large have an interest in reining in inequitable conduct. Notably, both the American Bar Association and the AmericanIntellectual Property Law Association, which representa wide spectrum of interests, support requiring but-for materiality(which is absent from Rule 56).

This court has looked to the PTO’s Rule 56 in the past as a starting point for determining materiality.SeeAm. Hoist,

725 F.2d at1363.

Rule 56 has gone through several revisions, from the “fraud” standard in its original promulgation in 1949 to the“reasonable examiner” standard in 1977 to the current version, which includes any information that “refutes or is inconsistentwith” any position the applicant took regarding patentability.See

37 C.F.R. § 1.56 (1950);37 C.F.R. § 1.56 (1977);37 C.F.R. §1.56 (1992). Tying the materiality standard for inequitable conduct to PTO rules, which understandably change from time totime, has led to uncertainty and inconsistency in the development of the inequitable conduct doctrine.See, e.g.,Digital Control,Inc. v. Charles Mach. Works,

(applying 1992 version of Rule 56).Experience thus counsels against this court abdicating its responsibility to determine the boundaries for inequitable conduct.

This court declines to adopt the current version of Rule 56 in defining inequitable conduct because reliance on this standard hasresulted in the very problems this court sought to address by taking this case en banc. Rule 56 provides that information ismaterial if it is not cumulative and:

(1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or

(2) It refutes, or is inconsistent with, a position the applicant takes in:

(i) Opposing an argument of unpatentability relied on by the Office, or

(ii) Asserting an argument of patentability.

37 C.F.R. § 1.56. Rule 56 further provides that a “prima facie case of unpatentability is established when the informationcompels a conclusion that a claim is unpatentable ...before any consideration is given to evidence which may be submitted in anattempt to establish a contrary conclusion of patentability.”Id.

(emphasis added). The first prong of Rule 56 is overly broadbecause information is considered material even if the information would be rendered irrelevant

in light of subsequentargument or explanation by the patentee. Under this standard, inequitable conduct could be found based on an applicant’sfailure to disclose information that a patent examiner would readily agree was not relevant to the prosecutionafter consideringthe patentee’s argument. Likewise, the second prong of Rule 56 broadly encompasses anything that could be consideredmarginally relevant to patentability. If an applicant were to assert that his invention would have been non-obvious, forexample,anything bearing any relation to obviousness could be found material under the*1295

second prong of Rule 56. Because Rule56 sets such a low bar for materiality, adopting this standard would inevitably result in patent prosecutors continuing theexisting practice of disclosing too much prior art of marginal relevance and patent litigators continuing to charge inequitableconduct in nearly every case as a litigation strategy.

The dissent’s critique of but-for materiality relies heavily on definitions of materiality in other contexts. Contrary to theimplication made in the dissent, however, but-for proofis

required to establish common law fraud. Common law fraud requiresproof

of reliance, which is equivalent to the but-for test for materiality set forth in this opinion.See

37 C.J.S.Fraud

§ 51

(“thereliance element of a fraud claim requires that the misrepresentation actually induced the injured party to change its course

ofaction”);Restatement (Second) of Torts

§ 525 (1977)

(fraud requires that the party “relies on the misrepresentation in acting orrefraining from action”);see, e.g.,

Exxon Mobil Corp. v. Ala. Dept. of Conservation & Natural Res.,

986 So.2d 1093, 1116(Ala.2007)

(reliance element of fraud “can be met only if the plaintiff does, or does not do, something that the plaintiff would orwould not have done but for the misrepresentation of a material fact”);Alliance Mortgage Co. v. Rothwell,

10 Cal.4th 1226,1239, 44 Cal.Rptr.2d 352, 900 P.2d 601 (Cal.1995)

(same);Luscher v. Empkey,

206 Neb. 572, 576, 293 N.W.2d 866(Neb.1980)

(same);Spencer v. Ellis,

216 Or. 554, 561, 339 P.2d 1116 (Or.1959)

(same). The remaining examples in the dissent,where

but-for materiality is not required, have limited relevance to inequitable conduct. While but-for materiality may not berequired in every context, it is appropriate for inequitable conduct in light of the numerous adverse consequences of a looserstandard.

Moreover, if this court were to consider standards of materiality in other contexts, the most analogous area of law is copyright.SeeSony Corp. of Am. v. Univ. City Studios, Inc.,

464 U.S. 417, 439, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984)

(finding itappropriate to draw an analogy between copyrights

and patents “because of the historic kinship between patent law andcopyright law”). But-for proof is required to invalidate both copyrights and trademarks based on applicant misconduct.See

17U.S.C. § 411(b)(1)

(copyright);Citibank, N.A. v. Citibanc Group, Inc.,

724 F.2d 1540, 1544 (11th Cir.1984)

(trademarks). Thedissent concedes that “but for” materiality is required to cancel a trademark but contends that it is not required to invalidatefederal registration of a copyright. Various courts haveheld otherwise.See

2 Melville B. Nimmer & David Nimmer,Nimmeron Copyright

§ 7.20 [B][1] (rev. ed.2010) (“plaintiff’s failure to inform the Copyright Office of given facts is withoutsubstance, to the extent that the Office would have registered the subject work even had it known those facts”). Moreover, theCopyright Act has codified this “but for” requirement, making clear that copyright registration is sufficient to permit aninfringement suit, even if the certificate of registration contains inaccurate information, unless “the inaccuracy of theinformation, if known, would have caused the Register of Copyrights to refuse registration.”17 U.S.C. § 411(b)(1);see also

2Nimmer on Copyright

§ 7.20[B][2] (explaining that the materiality “standard [set forth in the 2008 amendment to the CopyrightAct] is well in line with the construction of the Act prior to this amendment”).

unenforceable for inequitable conduct because Abbott did not disclosebriefs it submitted to the EPO

regarding the European counterpart of the ′382 patent.Trial Opinion

at 1127. Because*1296

thedistrict courtfound statements made in the EPO briefs material under the PTO’s Rule 56 materiality standard, not under thebut-for materiality standard set forth in this opinion, this court vacates the district court’s findings of materiality.Id.

at 1113,1115.

On remand, the district court should determine whether the PTOwould not have granted the patent but for Abbott’sfailure to disclose the EPO briefs. In particular, the district court must determine whether the PTO would have foundSanghera’s declaration and Pope’s accompanying submission unpersuasive in overcoming the obviousness rejection over the′382 patent

if Abbott had disclosed the EPO briefs.

25

The district court found intent to deceive based on the absence of a good faith explanation for failing to disclose the EPObriefs.Id.

at 1113–16.

However, a “patentee need not offer any good faith explanation unless the accused infringer first ...prove[s] a threshold level of intent to deceive by clear and convincing evidence.”Star,

537 F.3d at 1368.

The district court alsorelied upon the “should have known” negligence standard in reaching its finding of intent.SeeTrial Opinion

at 1113

(“AttorneyPope knew or should haveknown that the withheld information would have been highly material to the examiner”). Becausethe district court did not find intent to deceive under the knowing and deliberate standard set forth in this opinion, this courtvacates the district court’s findings of intent.Id.

at 1113–16.

On remand, the district court should determine whether there isclear and convincing evidence demonstrating that Sanghera or Pope knew of the EPO briefs, knew of their materiality, andmade the conscious decision not to disclose them in order to deceive the PTO.

For the foregoing reasons, this court vacates the district court’s finding of inequitable conduct and remands for furtherproceedings consistent with this opinion. This court also reinstates Parts I, III, and IV of the panel decision reported at593 F.3d1289,

affirming the district court’s judgment of obviousness, noninfringement, and anticipation, respectively. The judgmentbelow is

AFFIRMED–IN–PART, VACATED–IN–PART, and REMANDED–IN–PART.

COSTS

Each party shall bear its own costs.

O’MALLEY, Circuit Judge, concurring in part and dissenting in part.

Patent practitioners regularly call on this court to provide clear guidelines. They seek to know under precisely whatcircumstances governing principles will be applied, and

precisely how they will be applied. While precision may be in thenature of what patent practitioners do, and the desire for defining rules in the scientific world understandable, the law does notalways lend itself to such precision. Indeed, when dealing

with the application of equitable principles and remedies, the law isimprecise by design.

I understand and admire the majority’s desire to respond to practitioners’ calls for precision and clarity. I also understand

itsconcern with perceived litigationabuses surrounding assertions of inequitable conduct. I believe, however, that the majorityresponds to that call and addresses those concerns in ways that fail to acknowledge and remain true to the equitable nature of thedoctrine it seeks to cabin.

I respectfully dissent from those portions of the majority opinion which describe the test it directs lower courts to apply inassessing materiality and which vacates and remands for further inquiry the materiality determinations made by the districtcourt in this case. As explained*1297

below, I concur in the remainder of the majority’s decision and judgment.

I.

I concur in the majority’s

decision to vacate and remand the judgment of the district court with instructions to reconsider itsASD

finding of inequitable conduct. Specifically, because the district court understandably referred to standards governing its intentdetermination drawn from our prior case law, the district court should be given the opportunity to assess, in the first instance,whether the evidence, and its credibility determinations, support a finding of a specific intent to deceive. In this regard,like theother dissenters, I agree with the majority’s holding that, as a prerequisite to a finding of inequitable conduct, a district courtmust find that the conduct at issue is of “sufficient culpability to require a finding of intent to deceive.”Kingsdown Med.Consultants, Ltd. v. Hollister Inc.,

863 F.2d 867, 876 (Fed.Cir.1988). In making this determination, intent to deceive andmateriality must be found separately. District courts may not employ a “sliding scale,” nor may they infer intent frommateriality alone.1

Finally, I agree that a district court may infer intent from indirect and circumstantial evidence, but onlywhere it is “the single most reasonable inference able to be drawn from the evidence.” Maj. Op. at 1290 (quotingStar ScientificInc. v. R.J. Reynolds Tobacco Co.,

537 F.3d 1357, 1366 (Fed.Cir.2008)).

1

While I join this portion of the majority opinion (Part V), I do so with the understanding that the majority does not hold that it isimpermissible for

a court to consider the level of materiality as circumstantial evidence in its intent analysis. As in all other legalinquiries involving multiple elements, the district court may rely on the same items of evidence in both its materiality andintentinquiries. A district court must, however, reach separate conclusions of intent and materiality and may not base a finding of specificintent to deceive on materiality alone, regardless of the level of materiality.

II.

It is at this point that my views,respectfully, diverge from those of both the majority and the other dissenters. This is so because,when addressing the types of conduct that should be deemed of sufficient concern to allow for a finding of inequitable conduct,both the majority and dissent strain too hard to impose hard and fast rules.

“The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to thenecessities of the particular case.”Weinberger v. Romero–Barcelo,

456 U.S. 305, 312, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982)

(quotingHecht Co. v. Bowles,

321 U.S. 321, 329, 64 S.Ct. 587, 88 L.Ed. 754 (1944)). While courts of equity “must be governedby rules and precedents no less than the courts of law,”Lonchar v. Thomas,

(holding that a categorical rule of granting an injunction to aprevailing patent holder abrogates a district court’s discretion in granting equitable relief and runs afoul of traditional principlesof equity). We have long recognized that the doctrine of inequitable conduct is based in equity.Kingsdown,

principle, both the majority and dissenting opinions eschew flexibility in favor of rigidity. Both opinions suggest tests for

materiality to apply in all cases. Their respective materiality inquiries are black or white, while equity requires judicialconsideration of shades of gray.

The majority defines materiality under a but-for test, with an exception for intentionally false affidavits filed with the PTO.2

Maj. Op. at 1291–93. The dissent, on the other hand, defines materiality according to Rule 56. Both tests fail to provide districtcourts with flexibility to find inequitable conduct in an extraordinary case where the conduct in question would not be definedas such under either test. This result is contrary to the very nature of equity and centuries of Supreme Court precedent. I cannot,accordingly, lend support to either of the immutable tests proposed by my colleagues.

2

The majority responds to this characterization, and to the general criticism in this opinion, by defining its test more broadly andacknowledging a degree of

flexibility within its four corners. For that, I applaud the majority. I do not think, however, that thisadditional explanation is sufficient to address all of the concerns expressed in this opinion. I remain of the view that thetest Ipropose here is the most consistent with the doctrine’s origins.

While the majority states that, despite the strictures of the test it adopts, “the unclean hands doctrine remains available to supplyASD

a remedy for egregious misconduct like that in the Supreme Court cases,”

that statement does not address the concerns I expresshere.3

Maj. Op. at 1287–88. Since, as the majority painstakingly explains, the doctrine of inequitable conduct we are defininggrew out of those “uncleanhands” cases, the asserted dichotomy is a false one.SeeConsol. Aluminum Corp. v. Foseco Int’l,Ltd.,

910 F.2d 804, 812 (Fed.Cir.1990)

(“Indeed, what we have termed ‘inequitable conduct’ is no more than the unclean handsdoctrine applied to particular conduct before the PTO.”)(citations omitted). There is no support—and the majority citesnone—for the proposition that inequitable conduct is somehow independent of the unclean hands principles the Supreme Courtdescribed and explained in its trilogy of cases. The remainder of the

majority opinion makes clear, moreover, that the majority’spurpose, and that of the test it adopts, is to delimit and narrow the contours of the unclean hands doctrine when applied totheapplication process before the PTO, not to acknowledge flexibility

in it.4

3

Indeed, this language raises some additional concerns. If “unclean hands” remains available in cases of PTO misconduct, charges ofunclean hands could simply supplant the very allegations of inequitable conduct the majority seeks to curb.

4

At the other end of the spectrum, the dissent’s acknowledgement that a district court retains discretionto decline

to find inequitableconduct even in the face of evidence of materiality and intent is similarly insufficient to undercut the unyielding nature of

the test forinequitable conduct it adopts. It clearly does not allow, for instance, for a finding of inequitable conduct for conduct notencompassed by Rule 56.

We should adopt a test that provides as much guidance to district courts and patent applicants as possible, but, in doing so,

wemay not disregard the equitable nature of the inquiryat hand. Thus, we must make clear that, while we believe the test we offerencompasses virtually all forms of conduct sufficient to warrant a finding of inequitable conduct, we leave open the possibilitythat some form of intentional misconduct which we do

not currently envision could warrant equitable relief. This approachrespects the Supreme Court’s recognition that courts of equity “exercise judgment in light of prior precedent, but*1299

withawareness of the fact that specific circumstances, often hard to predict in advance, could warrant special treatment in anappropriate case.”Holland v. Florida,

–––

U.S.––––, 130 S.Ct. 2549, 2563, 177 L.Ed.2d 130 (2010).

Consistent with the flexible nature of equity jurisdiction, moreover, we should recognize that determining the proper remedyfor a given instance of inequitable conduct is within the discretion of district courts, subject, of course, to statutory constraints.Keystone Driller Co. v. Gen. Excavator Co.,

290 U.S. 240, 245–46, 54 S.Ct. 146, 78 L.Ed. 293 (1933)

(“[Courts of equity] arenot bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.”);Mills v.Elec. Auto–Lite Co.,

396 U.S. 375, 386, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970)

(“In selecting a remedy the lower courts shouldexercise the sound discretion which guides the determinations of courts of equity, keeping in mind the role of equity as theinstrument for nice adjustment and reconciliation between the public interest and private needs as well as between competingprivate claims.”) (internal quotations and citations omitted). While we have held previously that a finding of inequitableconduct renders unenforceable all claims of the wrongly procured patent and, in certain circumstances, related patents, thissingular remedy is neither compelled by statute, nor consistent with the equitable nature ofthe doctrine.5

Accordingly, I wouldoverrule those cases and hold that, in the exercise of its discretion, a district court may choose to render fewer than all claimsunenforceable, may simply dismiss the action before it, or may fashion some other reasonable remedy, so

long as the remedyimposed by the court is “commensurate with the violation.”Columbus Bd. of Educ. v. Penick,

443 U.S. 449, 465, 99 S.Ct. 2941,61 L.Ed.2d 666 (1979);see alsoHecht,

321 U.S. at 329, 64 S.Ct. 587

(“The essence of equity jurisdiction has been the power ofthe Chancellor to do equity and to mould each decree to the necessitiesof the particular case.”);Miller v. French,

530 U.S. 327,360, 120 S.Ct. 2246, 147 L.Ed.2d 326 (2000)

(“These cases recognize the importance of permitting courts in equity cases totailor relief ... to the exigencies of particular cases and individual circumstances. In doing so, they recognize the fact thatincertain circumstances justice requires the flexibility necessary to treat different cases differently—the rationale that underliesequity itself.”) (Breyer, J., dissenting) (emphasis added). Allowing for flexibility in the remedy would reduce the incentive touse inequitable conduct as a litigation tactic and address many of the concerns that trouble my colleagues and were expressed

by Abbott and certain amici in theseen banc

proceedings.6

5

While the 1952 Act codified the defense of unclean hands in paragraph (1) of35 U.S.C. § 282, it did not specify a remedy.See

(explaining that paragraph (1) includes “equitabledefenses such as laches, estoppel and unclean hands”). The statute, thus, provides no guidance as to whether, in its equitablediscretion, a court may render some, but not all, claims unenforceable. InJ.P. Stevens & Co. v. Lex Tex, Ltd.,

747 F.2d

1553(Fed.Cir.1984), we cited cases collected from a treatise for the proposition that inequitable conduct renders all of a patent’s claimsASD

None of those cases, however, are binding on this court and, for the reasons stated above, I find thisproposition inconsistent with the powerof the Chancellor to “mould” each decree to the necessities of the particular case.

6

One of the evils described by Abbott and amici is the possibility of an order barring enforcement of a patent based onmisrepresentation of an applicant’s “small entity status.” To the extent unenforceability may be too harsh in such circumstances—apointon which I do not opine—district courts would have discretion to fashion some lesser remedy to address that form ofintentional deception.

*1300

III.

To provide guidance to district courts to aid in the exercise of their discretion in inequitableconduct inquiries—beyond theSupreme Court’s direction that “any willful act concerning the cause of action which rightfully can be said to transgressequitable standards of conduct is sufficient cause for the invocation of the maxim by the chancellor,”Precision Instrument Mfg.Co. v. Auto. Maint. Mach. Co.,

324 U.S. 806, 814–16, 65 S.Ct. 993, 89 L.Ed. 1381 (1945)—I believe such guidance shouldreflect the concerns expressed by the Supreme Court in the case trilogy from which the doctrine emerged. As the Court said in

Precision,

at minimum, equity requires that, when seekingthe public benefit of a government sponsored monopoly, applicantsmust act “fairly and without fraud or deceit.”Id.

Similarly, inHazel–Atlas Glass Co. v. Hartford–Empire Co.,

322 U.S. 238, 64S.Ct. 997, 88 L.Ed. 1250 (1944), the Court found that, regardless of the impact of such conduct on patentability, the doors ofequity should be closed to a patentee who presented to the patent office, as impartial, an article it authored.Id.

at 247, 64 S.Ct.997.

With this general guidance in mind, I believe conduct should be deemed material where: (1) but for the conduct (whether it be

in the form of an affirmative act or intentional non-disclosure), the patent would not have issued (as Chief Judge Rader explainsthat concept in the majority opinion); (2) the conduct constitutes a false or misleading representation of fact (rendered soeitherbecause the statement made is false on its face or information is omitted which, if known, would render the representation falseor misleading); or (3) the district court finds that the behavior is so offensive that the court is left with a firm conviction that theintegrity of the PTO process as to the application at issue was wholly undermined. In adopting such a test, I also believe weshould confirm, as explained above, that the equitable nature of the doctrine demands that this test provide guidanceonly—albeit firm guidance—to district courts with respect to the exercise of their discretion in the face of inequitable conductclaims.

For the reasons ably articulated by the majority, I do not believe we should direct district courts to use Rule 56 as the measure ofmateriality in this context. As the majority points out, among other things, it is both too vague and too broad—leaving room forfindings of inequitable conduct in circumstances not sufficiently egregious to fall within the bounds of the Supreme Courttrilogy from which the doctrine emerged. I also cannot agree completely with the test proposed by the majority. Given the scopeand complexity of PTO proceedings, misconduct can and does occur outside the context of written affidavits. In certaincircumstances, regardless of the impact on patent issuance, such misconduct is sufficiently egregious that, when accompaniedby the requisite intent to deceive, it could support a finding of inequitable conduct. Indeed, inHazel–Atlas,

the article inquestion was not presented to the PTO through an affidavit.322 U.S. at 240–41, 64 S.Ct. 997.

Both tests, moreover, fail toallow room to address conduct beyond their contours which equity should not ignore.

IV.

Applying the test I propose, or any reasonable test for materiality that comports with Supreme Court precedent, I would affirmthe district court’s finding that the*1301

nondisclosure of information in this case wasmaterial. Indeed, I believe the omissionshere qualify as material under the majority’s “but-for plus” standard and that, even accepting that test as the governing standard,a remand on the issue of materiality is neither necessary nor appropriate.

As theother dissenters note, whether the prior art taught that glucose sensors could be used to test whole blood without aprotective membrane was a key focus of the PTO examiner’s patentability inquiry. After requesting permission to submitextrinsic evidence in response to a rejection from the PTO, Abbott submitted a sworn declaration from its expert Dr. GordonSanghera accompanied by statements from its counsel Lawrence Pope. Both contained representations to the examinerregarding what they alleged to be theappropriate understanding of the critical prior art reference with which the examiner wasconcerned. Among other things, they asserted unequivocally that one skilled in the art would not have read the prior art to saythat use of a protective membrane with

whole blood samples was optional. Omitted from these declarations was the fact thatAbbott had made contrary representations on this same matter to the European Patent Office (“EPO”) in connection with theearlier prosecution of a European patent application. There, Abbott represented that it was “unequivocally clear” that the sameprior art language meant that the protective membrane was, in fact, optional.

The district court concluded that these nondisclosures were “highly material” because “they centered on the precise sentence inquestion [in the prior art reference], its meaning and what it taught.”Therasense, Inc. v. Becton, Dickinson & Co.,

565F.Supp.2d 1088, 1112 (N.D.Cal.2008). More specifically, the district court found:

This is unlike the situation where a reference is already before an examiner who can draw his or her own conclusions as towhat it teaches and is able to discount spin offered by counsel.SeeInnogenetics, N.V. v. Abbott Labs.,

512 F.3d 1363, 1379(Fed.Cir.2008). Although the key sentence itself was indeed before Examiner Shay, the inquiry had shifted to a point ofextrinsic evidence. That is, Examiner Shay had acquiesced to Attorney Pope’s request to resort to extrinsic evidence to showthat the sentence would have been understood by skilled artisans differently than its

words suggested. Having receivedpermission to supply extrinsic evidence, Attorney Pope was duty-bound to present any inconsistent extrinsic informationknown to him. In the arena of extrinsic evidence, the examiner was unable to fend for himself. He hadno way of knowingwhat, if any, contrary extrinsic information had been left out of the Sanghera declaration. He was completely dependent onAttorney Pope and Dr. Sanghera to fully disclose any extrinsic information, pro and con, known to them on the factual pointcovered by the submission.

Id.

The district court’s materiality conclusions were thorough and correct. They should be affirmed.

V.

I do not weigh in on the policy debate between the majority and the dissenters. There are merits to the concerns expressed by

each, and they may be relevant, in varying degrees, to the exercise of a court’s discretion in a particular case. Policy concernscannot, however, justify adopting broad legal standards that diverge from doctrines explicated by the Supreme Court. A desire

to provide immutable guidance to lower courts

and parties similarly is not sufficient to justify the*1302

court’s attempt tocorral an equitable doctrine with neat tests.

To the extent there are concerns with litigation abuses surrounding the improper use of this otherwise important doctrine, thereare vehicles available to the district court to address those concerns. Careful application of the pleading requirements setforthinExergen Corp. v. Wal–Mart Stores, Inc.,

575 F.3d 1312 (Fed.Cir.2009), early case management techniques designed to ferretout and test unsupported inequitable conduct claims, orders to stay discovery or consideration of such claims pending all otherdeterminations in the case, or even sanctions, are all tools district courts can employ where appropriate.

For these reasons, I concur in part in and dissent in part from the decision the majority announces today. I would leave to districtcourts the discretion to apply this equitable doctrine to the uniquecircumstances with which they are presented, whileencouraging them to keep in sight their obligation to guard against abuses of it.

There is broad consensus that the law of inequitable conduct is in an unsatisfactory state and needs adjustment. In recent years,differing standards have been applied in determining whether particular conduct rises to the level of inequitable conductsufficient to render a patent unenforceable. That doctrinal uncertainty has had adverse consequences both for patent litigationand for the PTO. In litigation, counterclaims of inequitable conduct have been raised in too many cases and have proveddifficult to resolve. In the PTO, the lack of a clear and uniform standard for inequitable conduct has led some patent prosecutorsto err on the side of “overdisclosure” in order to avoid the risk of rendering all claims of an otherwise valid patent unenforceablebecause of the omission of some marginally relevant reference. As a result, examiners have frequently been swamped with anexcess of prior art references having little relevance to the applications before them.

These problems can be traced, at least in part, to doctrinal uncertainty on three points: First, what standard of intent should beapplied in assessing an allegation that an applicant has made false representations or failed to disclose material facts to the PTO.Second, what standard of materiality should be applied to such misrepresentations or nondisclosures. Third, whether thereshould be a “sliding scale” under which a strong showing of either materiality or intent should be able to make up for a weakershowing onthe other element.

There is substantial agreement as to the proper resolution of two of those three issues. First, the parties to

this case and most ofthe amici agree that proof of inequitable conduct should require a showing of specific intent to deceive the PTO; negligence,

oreven gross negligence, should not be enough. Second, the parties and most of the amici agree that a party invoking the defenseof inequitable conduct should be required to prove both specific intent and materiality by clear and convincing evidence; thereshould be no “sliding scale” whereby a strong showing as to one element can make up for weaker proof as to the other.

However, on the remaining issue—the proper standard to apply in determining whether the conduct at issue is sufficientlymaterial to render the patent in suit unenforceable—there is sharp disagreement. That disagreement is what divides the court inthis case. The majority takes the position that nondisclosures should be*1303

deemed sufficiently material to trigger thedefense of inequitable conduct only if, had the matter in question been disclosed, the applicant would not have obtained apatent. That position, however, marks a significant and, I believe, unwise departure from this court’s precedents. Since its firstdays, this court has looked to the PTO’s disclosure rule, Rule 56,37 C.F.R. § 1.56, as the standard for defining materiality ininequitable conduct cases involving the failure to disclose material information. In its current form, that rule provides thatinformation is material not only if it establishes a

prima facie case of unpatentability, but also if it refutes or is inconsistent witha position the applicant takes before the PTO with respect to patentability. I would adhere to the materiality standard set forth inthe PTO’s disclosure rule for two basic reasons: First, the PTO is in the best position to know what information examiners needto conduct effective and efficient examinations, i.e., what information is material to the examination process. Second, thehigher standard of materiality adopted bythe majority will not provide appropriate incentives for patent applicants to complywith the disclosure obligations the PTO places upon them.

this court was faced with conflicting precedentsregarding the “intent” requirement of the doctrine of inequitable conduct. The court resolved those conflicts in an en bancdecision that all members of the court joined.863 F.2d 867 (Fed.Cir.1988)

(en banc). The court held that even proof of “grossnegligence” is not sufficient to satisfy the intent to deceive requirement. Instead, the court concluded that in order for particularconduct to justify holding a patent unenforceable, the conduct in question, “viewed in light of all the evidence, includingevidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive.”Id.

at 876.

TheKingsdown

court did not find it necessary to address the proper standard for determining materiality, because that issue hadbeen addressed in earlier cases. Four years beforeKingsdown,

a five-judge panel opinion inJ.P. Stevens & Co. v. Lex Tex Ltd.,

747 F.2d 1553 (Fed.Cir.1984), had addressed the materiality requirement and made the following observations, which haveremained the law until today: First, the court endorsed

the principle, previously adopted by our predecessor court, thatinequitable conduct is broader than common law fraud.Id.

at 1559

(citingNorton v. Curtiss,

433 F.2d 779, 793 (CCPA 1970)).Second, the court explained that inequitable conduct could be based on the failure to disclose material information as well as thesubmission of

false material information.Id.

Third, the court stated

that the disclosure requirement set forth in PTO Rule 56,37C.F.R. § 1.56 (1984), established “the appropriate starting point” because that standard “most closely aligns with how oneought to conduct business with the PTO.”J.P. Stevens,

731 F.2d 878, 884 (Fed.Cir.1984), where the court had stated that PTO Rule 56 “essentially represents acodification of the ‘clean hands’ maxim as applied to patent applicants.” Moreover, just a year before the decision inKingsdown,

that Rule 56 set forth the appropriate standard for determining the materiality of undisclosed information in an inequitableconduct case.

Since that time there have been occasional departures from the holding inKingsdown

as to the requisite level of*1304

intent toestablish inequitable conduct. As to materiality, however, the court has consistently held that the PTO’s Rule 56 sets the properbaseline for determining materiality, although there has been some variation in our decisions with regard to which version of

the PTO’s rule applies in particular cases.

The appropriate cure for departures from the principles of inequitable conduct that were put in place at the time ofKingsdown

would be to reaffirm those principles, as summarized above. The majority, however, has taken a far more radical approach.With respect to the issue of materiality, the majority

has adopted a test that has no support in this court’s cases and isinconsistent with a long line of precedents dating back to the early years of this court. The effect of the majority’s new test,moreover, does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether. I respectfullydissent from that aspect of the court’s decision. In my view, what is needed is not to jettison the doctrine of inequitable conduct,but simply to reaffirm the principles set down in the early years of this court in light of the provisions of the current PTOdisclosure rule, and require adherence to those principles. As applied to the duty of an applicant or attorney to disclose materialinformation in the course of prosecuting a patent

application, those principles can be summarized as follows:

1. Inequitable conduct requires proof, by clear and convincing evidence, that the applicant or attorney intended to mislead thePTO with respect to a material matter.

2. Materiality is measured by what the PTO demands of those who apply for and prosecute patent applications. The disclosurestandard that the PTO expects those parties to comply with is set forth in the current version of the PTO’s Rule 56. Under thatstandard, inequitable conduct requires proof that the information at issue either established, by itself or in combination withother information, a prima facie case of unpatentability, or was inconsistent with a position taken by the applicant before thePTO with respect to patentability.

3. Intent to mislead and materiality must be separately proved. There is no “sliding scale” under which the degree of intentthatmust be proved depends on the strength of the showing as to the materiality of the information at issue.1

1

It is important to distinguish between relaxing the required proof of intent if the proof of materiality is strong, which isimpermissible, as

opposed to considering the degree of materiality as relevant to the issue of intent, which is appropriate,particularly given that direct evidence of intent, such as an admission of deceptive purpose, is seldom available.SeeCargill, Inc. v.Canbra Foods, Ltd.,

These principles notonly are consistent with our law on inequitable conduct but, if implemented consistently, should besufficient to address the practical problems that have arisen under the current regime. While the majority is correct thatinequitable conduct claims have been raised too often in the past, there are less Draconian means of addressing that problemthan those proposed by the majority. First, the refinements to the doctrine suggested here would be likely to significantly reducethe frequency with which the defense is raised. Second, this court has recently held that the strict pleading requirements ofFed.R.Civ.P. 9(b)

averments and not merelynotice pleading with respect to such claims. Such pleading requirements are likely to discourage baseless counterclaims.SeeExergen Corp. v. Wal–Mart Stores, Inc.,

575 F.3d 1312, 1326–29 (Fed.Cir.2009). Third, assertions of inequitable conduct thatlack factual and legal support can be controlled by trial courts through application of the sanctions provided byFed.R.Civ.P. 11.Finally,

as this court has repeatedly held, the doctrine of inequitable conduct is an equitable doctrine, and even when theelements of intent and materiality are satisfied, it remains for the district court to determine, in the exercise of its equitablejudgment,

whether, “in light of all the particular circumstances, the conduct of the patentee is so culpable that its patent shouldnot be enforced.”LaBounty Mfg., Inc. v. U.S. Int’l Trade Comm’n,

958 F.2d 1066, 1070 (Fed.Cir.1992).

With regard to the problem of “over-disclosure” of large numbers of marginally relevant references in the course of patentprosecution, the PTO in its amicus brief expresses confidence that strict judicial adherence to the “clear and convincing”standard by which accused infringers must prove specific intent

problem of over-disclosure directly affects the PTO, there is no reason not to credit the PTO’s assertion that a tightening of theintent element of the inequitable conduct doctrine should be sufficient to address the problem and that a drastic modification ofthe materiality element not only is not required, but would be contrary to the PTO’s interest in efficient examinations.

II

The majority holds that a failure to disclose information is “material” for purposes of inequitable conduct only if it satisfies the“but for” test; i.e., the conduct must be such that, but for the conduct, the claims would have been found unpatentable. This

isnot a tweak to the doctrine of inequitable conduct; it is

fundamental change that would have the effect of eliminating theindependent role of the doctrine of inequitable conduct as to disclosure obligations except in limited circumstances. This courthas repeatedly rejected the “but for” test as too restrictive

in light of the policies served by the inequitable conduct doctrine.SeeMerck & Co. v. Danbury Pharmacal, Inc.,

798 F.2d 1392, 1396(Fed.Cir.1986). Those policies dictate that it should continue to do so.

As the PTO persuasively argues in its amicus brief, the “but for” standard for materiality is too restrictive to serve the purposesthat the doctrine of inequitable conduct was designed to promote. If a failure to disclose constitutes inequitable conduct onlywhen a proper disclosure would result in rejection of a claim, there will be little incentive for applicants to be candid with thePTO, because in most instances the sanction of inequitable conduct will apply only if the claims that issue are invalid anyway.For example, under the “but for” test of materiality, an applicant considering whether to disclose facts about a possible prior useof the invention would have little reason to disclose those facts to the PTO. If the applicant remained silent about the prior use,the patent issued, and the prior use was never discovered, the applicant would benefit from the nondisclosure. But even if theprior use was discovered during litigation, the failure to disclose would be held to constitute inequitable conduct only if the*1306

prior use otherwise rendered the relevant claims invalid. The applicant would thus losenothing by concealing the prioruse from the PTO, because he would not be at risk of losing the right to enforce an otherwise valid patent.

In that situation, particularly if the opportunity to obtain a valuable patent is at stake, there will be no inducement for theapplicant to be forthcoming. If the applicant withholds prior art or misleadingly discloses particular matters and succeeds,heobtains a patent that would not have issued otherwise. Even if the nondisclosure or misleading disclosure is later discovered,under the majority’s rule the applicant is no worse off, as the patent will be lost only if the claims would otherwise be heldinvalid. So there is little to lose by following a course of deceit. It is no indictment of the uprightness and professionalism ofpatent applicants and prosecutors as a group to say that they should not be subjected to an incentive system such as that. Afterall, it has long been recognized that “an open door may tempt a saint.” Given the large stakes sometimes at issuein patentprosecutions, a regime that ensures that a dishonest but potentially profitable course of action can be pursued with essentially nomarginal added risk is an unwise regime no matter how virtuous its subjects.

It is unrealistic to expect that other means will provide an effective deterrent to ensure that material information will not bewithheld during patent prosecutions. The PTO advises us that the prospect of enforcing the duty of disclosure other thanthrough the threat of inequitable conduct claims is not possible or practical. The prospect of agency disciplinary action fordisclosure violations is unrealistic, the PTO explains, because the Office is required by statute to file any charges withinfiveyears,see

28 U.S.C. § 2462, and it seldom learns of inequitable conduct within that period of time. In addition, the PTOexplains that it rarely has access to relevant facts regarding inequitable conduct, because it lacks investigative resources.

As aresult, the PTO has concluded that a court is the best forum in which to consider alleged breaches of the disclosure duty in thecontext of an inequitable conduct defense.See

Court and the PTO have both described as applying to those who seek patents in the ex parte application process.

A

The doctrine of inequitable conduct has its origins in a trilogy of Supreme Court decisions dating back to the 1930s. The first ofthe three cases,Keystone Driller Co. v. General Excavator Co.,

290 U.S. 240, 54 S.Ct. 146, 78 L.Ed. 293 (1933), applied theequitable principle of “unclean hands” in a case in which a patentee’s representative had obtained a false affidavit and takenother steps to avoid the disclosure of a possibly invalidating prior use of the patented invention. The patentee obtained afavorable decree in an infringement action against a different defendant and then relied on that decree in obtaining preliminaryinjunctions against the defendants in the cases before the Court.

The Supreme Court found the connection between earlier and later cases to be sufficient “to show that plaintiff did not comewith clean hands” in the later cases. Based on that finding, the Court concluded that the previous misconduct justified the*1307

dismissal of the complaints in those cases. In reaching that determination, the Court did not find it necessary to decide whetherthe evidence of prior use that the plaintiff had suppressed would have had the effect of invalidating the patent. It was enoughthat the improper conduct had “immediate and necessary relation to the equity [that the patentee sought] in respect of the matterin litigation.”290 U.S. at 245, 54 S.Ct. 146.

A decade later, inHazel–Atlas Glass Co. v. Hartford–Empire Co.,

322 U.S. 238, 64 S.Ct. 997, 88 L.Ed. 1250 (1944), theSupreme Court again held a patent unenforceable, this time in part because of misconduct by the patentee before the PatentOffice in obtaining the patent. The patentee, encountering resistance to issuance of the patent by the Patent Office, arranged forthe publication of an article in a trade publication that described the invention as a remarkable advance in the field. The articlepurported to be the product of a disinterested party, even though it wasactually written by one of the patentee’s lawyers. Thepatent ultimately issued. The article was also used in court, where it assisted the patentee in obtaining a favorable judgmentfrom an appellate court. The patentee subsequently went to considerable lengths to ensure that the truth regarding theauthorship of the article would not emerge. The efforts at concealment failed, however, and the accused infringer sought reliefin the lower court based on the misconduct.

Because the misconduct was discovered after the expiration of the term of court during which the judgment in question wasentered, the Supreme Court invoked the doctrine of after-discovered fraud, which permitted a court to revisit a judgment evenafter the end of the term in which it was entered, if the circumstances “are deemed sufficiently gross to demand a departure fromrigid adherence to the term rule.”322 U.S. at 244, 64 S.Ct. 997.

The Court found that standard to be satisfied on the facts beforeit.

In response to the argument that the article in question was not “basic” to the issues in litigation, the Supreme Court stated thatthe circumstances did not “call for such an attempted appraisal.”322 U.S. at 247, 64 S.Ct. 997.

The Court explained:“Hartford’s officials and lawyers thought the article material. They conceived it in an effort

to persuade a hostile Patent Officeto grant their patent application, and went to considerable trouble and expense to get it published.”Id.

The Court added thatHartford’s fraud “had its genesis in the plan to publish an article for the deliberate purpose of deceiving the Patent Office.... Hadthe District Court learned of the fraud on the Patent Office at the original infringement trial, it would have been warranted indismissing Hartford’s case.”Id.

at 250, 64 S.Ct. 997.

Significantly, the Court did not regard the issue of Hartford’s conduct asturning on whether the fraudulent conduct was the “but for” cause of the issuance of the patent. The Court stated that it wouldhave come to the same conclusion even if the statements from the fraudulently procured article were actually true.Id.

at 247, 64S.Ct. 997.

“But for” causation was not necessary to finding materiality. Instead, the Court focused

on the patentee’s “deliberatepurpose of deceiving the Patent Office” as the core reason for refusing to enforce the patentee’s rights in the patent.

A year later, the Supreme Court again addressed the issue of the effect of misconduct during proceedingsbefore the PatentOffice on subsequent patent enforcement actions in court. That case,Precision Instrument Manufacturing Co. v. AutomotiveMaintenance Machinery Co.,

324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381 (1945),*1308

arose following an involved sequence ofevents, the upshot of which was that Automotive obtained rights to a patent knowing that the original applicant had made falsestatements pertaining to the dates of conception and reduction to practice of the claimed invention. The Supreme Court held thepatent unenforceable, applying the doctrine of unclean hands against the patent owner based on its knowledge of theASD

The Court explained that the sort of misconduct necessary to trigger a court’s refusal to aid “the unclean litigant”

need not be“of such a nature as to be punishable as a crime or as to justify legal proceedings of any character. Any willful act concerningthe cause of action which rightfully can be said to transgress equitable standards of conduct is sufficient causefor the invocationof the maxim by the chancellor.”324 U.S. at 815, 65 S.Ct. 993.

The Court added that “where a suit in equity concerns the publicinterest as well as the private interests of the litigants this doctrine assumes even wider and more significant proportions.”Id.

The enforcement of a patent, the Court stated, is a matter “concerning far more than the interests of the adverse parties. Thepossession and assertion of patent rights are ‘issues of great moment to the public.’ ”Id.

In a statement that has served as thebasis for the subsequent development of the doctrine of inequitable conduct, the Court added that “[t]he far-reaching social andeconomic consequences of a patent ... give the public a paramount interest in seeing that patent monopolies spring frombackgrounds free from fraud or other inequitable conduct.”Id.

at 816, 65 S.Ct. 993.

The Court refused to enforce Automotive’s patent because it concluded that Automotive “knew and suppressed facts that, at thevery least, should have been brought in some way to the attention of the Patent Office.”324 U.S. at 818, 65 S.Ct. 993.

TheCourt explained, “Those who have applications pending with the Patent Office or who are parties to Patent Office proceedingshave an uncompromising duty to report to it all facts concerning possible fraud or inequitableness underlying the applications inissue.... Public interest demands that all facts relevant to such matters be submitted formally or informally to the Patent Office,which can then passupon the sufficiency of the evidence. Only in this way can that agency act to safeguard the public in the firstinstance against fraudulent patent monopolies.” Because Automotive had prosecuted the patent application and obtained thepatent “without ever attempting to reveal to the Patent Office or to anyone else the facts it possessed concerning theapplication’s fraudulent ancestry,” the Court concluded that Automotive “has not displayed that standard of conduct requisite

tothe maintenance of this suit in equity.”Id.

at 819, 65 S.Ct. 993.

As in theKeystone

andHazel–Atlas

cases, the Supreme Court in thePrecision Instrument

case did not look to whether theconduct in question would have rendered the plaintiff’s application unpatentable. In holding all of Automotive’s patents to beunenforceable, the Court found it was enough that the plaintiff had intentionally withheld information from the Patent Office

that should have been submitted so that the Patent

Office could consider it. There was no suggestion in the Court’s opinion thatthe dismissal of the action would be appropriate only if, but for the conduct, the patent would not have issued.

The principles set down by the Court inKeystone,

Hazel–Atlas,

andPrecision Instrument

can be summarized as follows: (1) thepublic has a special interest in seeing that patent monopolies “spring*1309

from backgrounds free from fraud or otherinequitable conduct”; (2) as a corollary to that public interest, patent applicants “have an uncompromising duty to report to

[thePatent Office] all facts concerning possible fraud or inequitableness underlying the applications”; (3) all facts relevant to suchmatters must be submitted to the Patent Office, “which can then pass upon the sufficiency of the evidence”; (4) the intentionalfailure to disclose to the Patent Office that a patent application is tainted by fraud is sufficient cause to

justify not enforcing thepatent; and (5) the misconduct in question need not constitute actionable fraud; it is sufficient if the conduct constitutesa willfulact that violates standards of equitable conduct in dealing with the Patent Office.2

2

Two decades before theKeystone–Hazel–Precision

trilogy, the Supreme Court considered the effect of misstatements made duringprosecution on the validity of a patent on a method for vulcanizing

rubber.Corona Cord Tire Co. v. Dovan Chem.Corp.,

276 U.S.358, 48 S.Ct. 380, 72 L.Ed. 610 (1928).

Before the Patent Office, the inventor attempted to swear behind a reference by submitting affidavits averring an earlier date ofconception and reduction to practice for his invention. The inventorasserted that he had successfully used the claimed method “inthe vulcanization of rubber goods,” and one of his fellow chemists stated that the method had been used “in the actualvulcanization of rubber goods, such as hose, tires, belts, valves and other

mechanical goods.”Id.

at 373, 48 S.Ct. 380.

In fact, atthe time referred to in the affidavits the inventor had used his method only on test slabs of rubber. The Court noted that whetherthe claimed method was used in the production of useful articles was not relevant to the asserted claims, and it

therefore held thatthe false affidavit, while reckless, was not “the basis for” or “essentially material to” the issuance of the patent. The Courttherefore declined to invalidate the asserted claims on that ground.Id.

at 374, 48 S.Ct. 380.

Although the majority citesCorona

as support for its narrow interpretation of the materiality requirement for inequitable conduct,Corona

is of little relevance to that

issue.Corona

predates the creation of the inequitableconduct doctrine and has never beencited by the Supreme Court in any case addressing unclean hands or inequitable conduct. Apart from the fact that the decision

addressed the issue of validity, rather than enforceability, the Court’s decision was based on

its conclusion that the affidavit inquestion was not material because what mattered was that the method had been used to vulcanize rubber, not that it had been usedto vulcanize rubber that was in turn used to make particular goods. Given that the nature

of the rubber objects that the inventorvulcanized was not relevant to the issues before the Patent Office, it is not surprising that the Court found the error not to bematerial. In any event, the Court’s choice of language—stating that the affidavits “were not the basis for [the issuance of theASD

patent] or essentially material to its issue,” is not restricted to a “but for” test, but suggests a broader standard for materiality.

Shortly after the decisions in theKeystone,

Hazel–Atlas,

andPrecision Instrument

cases, the Supreme Court made a furtherobservation that bears directly on the responsibilities of attorneys and applicants who appear before the PTO. The Courtendorsed the statement that, “By reason of the nature of an application for patent, the relationship of attorneys to the PatentOffice requires the highest degree of candor and good faith. In its relation to applicants, the Office ... must rely upon theirintegrity and deal with them in a spirit of trust and confidence....”Kingsland v. Dorsey,

338 U.S. 318, 319, 70 S.Ct. 123, 94L.Ed. 123 (1949). Because the PTO lacks the investigative and research resources to look behind representations by applicantsand their counsel, it necessarily relies on those representations as to many facts that arise during the prosecution of patentapplications, including experimental results obtained

by the applicants, the state of the prior art, and the knowledge of personsof skill in the art in the field in question. Some of these facts will be uniquely in the hands of the applicant*1310

and, as apractical matter, undiscoverable by an examiner at

the PTO. For those reasons, the PTO has imposed a duty on applicants toprovide examiners with information that is material to patentability.

B

The PTO has defined the disclosure obligation for those involved in patent prosecutions in its Rule 56, whichthe PTO haspromulgated under its statutory authority to establish regulations that “govern the conduct of proceedings in the Office.”35U.S.C. § 2(b). When Rule 56 was first promulgated in 1949, the portion of the rule that addressed inequitable conduct providedthat “any application fraudulently filed or in connection with which any fraud is practiced or attempted on the Patent Office,may be stricken.”37 C.F.R. § 1.56 (1950).

The Court of Customs and Patent Appeals construed the PTO’s disclosure rule in its 1970 decision inNorton v. Curtiss,

433F.2d at 779.

The court in that case upheld the Commissioner’s authority to strike a patent application for fraud on the PTO inviolation of the PTO’s Rule 56. Interpreting the term “fraud” in Rule 56, the court began by noting that theterm should not belimited to the kind of fraud that would be independently actionable as a tort or crime (which the court referred to as “technicalfraud”). Instead, the court explained that “fraud” as used in the Rule included “a wider range of ‘inequitable’ conduct” thatwould justify holding a patent unenforceable.Id.

at 793.

Defining fraud more broadly for the purpose of Rule 56 was justified,the court ruled, because “applicants before the Patent Office are being held to a relationship of confidence and trust to thatagency. The indicated expansion of the concept of ‘fraud’ manifests an attempt by the courts to make this relationshipmeaningful.”Id.

court recognized “a relationship oftrust between the Patent Office and those wishing to avail themselves of the governmental grants which that agency has beengiven authority to issue.”433 F.2d at 793.

In light of the ex parte nature of patent prosecution, the number of applications filed,and the limited capacity of the PTO “to ascertain the facts necessary to adjudge the patentable merits of each application,”thecourt stated that the “highest standards of honesty and candor on the part of applicants presenting such facts to the officeare ...necessary elements in a working patent system.”Id.

at 794.

For that reason, the court approved of “the expansion of the types ofmisconduct for which applicants will be penalized.”Id.

In light of those policies, the court explained that the test for materiality “cannot be applied too narrowly if the relationship ofconfidence and trust between applicants and the Patent Office is to have any real meaning,” and that findings of materialityshould not be limited to those cases in which the true facts, if they had been known, “would most likely have prevented theallowance of the particular claims at issue.”433 F.2d at 795.

In such cases, the claims at issue “would probably be invalid, inany event,” and the question whether the patent was unenforceable “would really be of secondary importance.”Id.

Accordingly,the court concluded that a proper interpretation of the materiality element must include factors other than thepatentability of the claims at issue, including “the subjective considerations of the examiner and the applicant.”Id.

In 1977, the PTO substantially revised Rule 56 to make more explicit the disclosure obligations imposed on patent applicants.*1311

Patent Examining and Appeal Procedures, 41 Fed.Reg. 43,729, 43,730 (proposed Oct. 4, 1976). The 1977 version of therule imposed a “duty of candor and good faith” on those involved in the preparation or prosecution of patent

applications andrequired them “to disclose to the Office information they are aware of which is material to the examination of the application.”The rule defined information as “material” if there was “a substantial likelihood that a reasonable examinerwould consider itASD

important in deciding whether to allow the application to issue as a patent.”

Shortly after this court’s creation, the court began addressing inequitable conduct claims raised in the course of patentinfringement litigation. From the outset, the court looked to the PTO’s Rule 56 as setting an appropriate standard for themateriality prong of the doctrine of inequitable conduct.SeeAm. Hoist & Derrick Co.v. Sowa & Sons, Inc.,

725 F.2d 1350,1363 (Fed.Cir.1984)

(“The PTO ‘standard’ is an appropriate starting point for any discussion of materiality”; failure to satisfythat disclosure obligation, combined with an intent to deceive the PTO, can render a patent unenforceable);J.P.

(adopting Rule 56 standard for materiality). In particular, the court endorsed the use of that standard as theproper test for materiality when an appropriate level of intent was shown.SeeSpecialty Composites v. Cabot Corp.,

845 F.2d981, 992 (Fed.Cir.1988)

(“Nondisclosed or false information is materialif there is a substantial likelihood that a reasonableexaminer would have considered the omitted reference or false information important in deciding whether to allow theapplication to issue as a patent.”);Halliburton Co. v. Schlumberger Tech. Corp.,

925 F.2d 1435, 1440 (Fed.Cir.1991)

(“Information is material if there is ‘substantial likelihood that a reasonable examiner would consider it important in decidingwhether to allow the application to issue as a patent.’ ”) (citing the 1977 version of PTO Rule 56).

In the ensuingyears, this court has regularly referred to the “reasonable examiner” test as the standard for measuring materialityin cases raising claims of inequitable conduct.See, e.g.,Golden Hour Data Sys., Inc. v. emsCharts, Inc.,

(citing cases). Under that test, the court has consistently ruled that afalse statement or nondisclosure may be material for purposes of an inequitable conduct determination even if the invention inquestion would otherwise be patentable.See, e.g.,Digital Control, Inc. v. Charles Mach. Works,

1992, the PTO revised Rule 56, adopting what it called a “clearer and more objective definition of what information theOffice considers material to patentability.”Duty of Disclosure, 57 Fed.Reg.2021, 2023 (Jan. 17, 1992). As revised in 1992, thecurrent version of Rule 56imposes a duty on individuals associated with the filing and prosecution of an application to discloseto the Office all information known to be material to patentability as defined in*1312

the rule. Rule 56(a). The rule then statesthat information is “material” if it is “not cumulative to information already of record or being made of record in theapplication” and

(1) It establishes, by itself, or in combination with other information, a prima facie case of unpatentability of a claim; or

(2) It refutes,

or is inconsistent with, a position the applicant takes in:

(i) Opposing an argument of unpatentability relied on by the Office, or

(ii) Asserting an argument of patentability.

The first part of Rule 56(b) requires the applicant to provide information that, at least absent explanation or furthersupplementation, would compel the conclusion that the invention is unpatentable. The rule explains that a “prima facie case ofunpatentability”

is established “when the information compels a conclusion that a claim is unpatentable under thepreponderance of the evidence, burden-of-proof standard, giving each term its broadest reasonable construction consistent withthe specification, and before any consideration is given to evidence which may be submitted in an attempt to establish acontrary conclusion of patentability.” In adopting the rule, the PTO explained that it intended for applicants to submitreferences, of which they were aware, that would render the pending claims unpatentable over the references. Proposed Rules,56 Fed.Reg. 37,321, 37,324 (Aug. 6, 1991). The PTO added that it is the role of the examiner, not the applicant, to analyze thesufficiency and weight of a rebuttal argument. Seeid.

The intent standard imposed by Rule 56 and adopted by this courtanswers the majority’s concerns regarding the breadth of the first part of Rule 56(b). That provision applies only to applicantswho act with the specific intent to deceive the PTO by withholding prior art that is so powerful as to render the pending claimsinvalid in the absence of further explanation.

It is the second part of the rule, Rule 56(b)(2), to which the appellants object. That part of the rule requires the applicant toprovide information that is inconsistent with or refutes a position taken by the applicant before the office. Rule 56(b)(2) clearlygoes beyond a “but for” test and is therefore the focus of the dispute in this case.

At the time it adopted the 1992 revision to Rule 56, the PTO considered the possibility of adopting a “but for” test of materialityof the sort that the majority has adopted today. The Office rejected that test, concluding that adopting such a narrow standard“would not cause the Office to obtain the information it needs to evaluate patentability so that its decisions may be presumedcorrect by the courts.” The PTO added that if it did not have the needed information, “meaningful examination of patentapplications will take place for the first time in an infringement case before a district court.”Duty of Disclosure, 57 Fed.Reg. at2023.

In the aftermath of that change, this court has frequently treated the PTO’s new version of the rule as setting forth the properstandard for materiality, in cases involving claims of failureto disclose material information, at least for applications processedafter 1992. InBruno Independent Living Aids, Inc. v. Acorn Mobility Services, Ltd.,

394 F.3d 1348 (Fed.Cir.2005), the courtquoted the 1992 version of Rule 56 and held that for patents prosecuted while that version of the rule was

in effect, “we evaluatethe materiality of the [undisclosed matter] under the standard set forth in the applicable amended rule.”Id.

at 1352–53;

see alsoHoffmann–LaRoche,

323 F.3d at 1368 n. 2.

The court added that “we give deference to the PTO’s formulation at the time anapplication is being prosecuted before an examiner*1313

of the standard of conduct it expects to be followed in proceedings inthe Office.”Bruno,

604 F.3d 1324, 1333 (Fed.Cir.2010). As it did before 1992, the court has continued to make clearthat it does not apply a “but for” test for materiality.SeeGolden Hour Data Sys.,

614 F.3d at 1374;

Hoffmann–LaRoche,

323F.3d at 1368;

Molins PLC,

48 F.3d at 1179–80.

On occasion, when addressing the issue of materiality, this court has referred to both the 1977 standard and the 1992 standardthat supplanted it as pertinent to the definition of materiality.See, e.g.,Digital Control,

437 F.3d at 1316.

The court has done soin light of the fact that, as the PTO has explained, the 1992 standard was not meant to signal a sharp departure from the 1977standard. Yet while the two standards were not meant to be dramatically different, the court has recognized that the PTOregards the 1992 standard as setting forth a clearer and more precise statement of the disclosure necessary to conductingefficient examinations.SeeRothman v. Target Corp.,

556 F.3d 1310, 1323 (Fed.Cir.2009);Purdue Pharma L.P.,

438 F.3d at1129;

Pharmacia Corp. v. Par Pharm., Inc.,

417 F.3d 1369, 1373 (Fed.Cir.2005).

The PTO has explained that the 1992 amendment was proposed “to address criticism concerning a perceived lack of certainty inthe materiality standard.” M.P.E.P. § 2001.04. The revised rule was intended “to provide greater clarity and hopefully minimizethe burden of litigation on the question of inequitable conduct before the Office, while providing the Office with theinformation necessary for effective and efficient examination of patent applications.”Id.

Moreover, in its brief in this case thePTO has

urged this court to adopt the standard set forth in the current PTO Rule 56 as the standard for material nondisclosuresrather than referring to both the 1992 standard and the “reasonable examiner” standard from the 1977 version of the Rule.

Because the PTO is the best judge of what information its examiners need to conduct effective examinations, the PTO’sdefinition of materiality is entitled to deference in determining whether the failure to disclose particular information duringpatent prosecution constitutes inequitable conduct. Moreover, because the PTO has refined the materiality standard in settingforth what it expects of applicants and their representatives, there is no need for courts to apply a broader test of materiality inadjudicating inequitable conduct claims, as doing so could at least theoretically result in the imposition of sanctions for a failureto disclose matters that the PTO does not require to be disclosed.3

*1314

This is not to suggest

that any disclosure requirementthat the PTO might have devised would serve as a predicate for an inequitable conduct charge. Because inequitable conduct isan equitable doctrine applied by courts, and not simply a mechanism for judicial enforcement of PTO rules, the scope of thecourt-made doctrine is not inseparably tied to the breadth of the PTO’s disclosure rules. However, the basic purposes of both theinequitable conduct doctrine and Rule 56 are the same, and the disclosure duties that the PTO imposes on applicants, which aredefined by Rule 56, are reasonably calculated to produce the disclosure necessary to promote efficient conduct of examinationsand to discourage the types of omissions and misrepresentations that (if made intentionally) raise equitable concerns. In thesecircumstances, considerations of efficiency and economy encourage us to embrace the PTO’s approach. So long as itreasonably aligns with our own equitable calculus, we should defer to the PTO’s assessment of its needs and treat intentionalbreaches of the PTO’s disclosure rules as providing a basis for a finding of inequitable conduct.SeeBruno Indep. Living,

The PTO’s Rule 56 deals with the “duty to disclose informationmaterial to patentability” and does not explicitly address affirmativefalse statements to the PTO made by parties prosecuting a patent application. In some instances, as in this case, a false ormisleadingaffirmative statement also violates the disclosure requirement, because when a party makes a statement that is inconsistent with theparty’s own prior statement, the failure to disclose the prior statement constitutes a failure to disclose information that “refutes, or isinconsistent with, a position the applicant takes” in asserting patentability or opposing an argument of unpatentability relied on bythe PTO. Rule 56(b)(2). An affirmative false statement that does not separately violate the disclosure rules may nonethelessbecontrary to the broader “duty of candor and good faith” referred to in paragraph (a) of Rule 56, which is imposed on “each individualassociated with the filing and prosecution of a patent application.”SeeNilssen v. Osram Sylvania, Inc.,

504 F.3d 1223, 1231–32(Fed.Cir.2007);Dayco Prods.,

329 F.3d at 1363–64.

The majority

holds that the “but for” test does not apply to “affirmative acts of egregious misconduct.” It then adds that neither“nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit constitutes affirmativeegregious misconduct” under any circumstances. As this case illustrates, it is often difficult to draw a line between nondisclosureand affirmative misrepresentation. For example, is a submission to the PTO that purports to describe the state of the prior art

butknowingly omits the closest prior art an “affirmative act” of misconduct or merely a “non-disclosure of information”? Even theHazel–Atlas

case, which the majority describes as an example of egregious misconduct, could be regarded as an instance ofnondisclosure, as the problem identified by the Supreme Court was the failure to disclose that the article in question was actuallywritten by an attorney for the patentee. The distinction between “affirmative acts” and “nondisclosure” is thus apt to become

fertile ground for litigation in the future, not to mention the distinction between “egregious” misconduct and misconduct that isassertedly less than “egregious.”

Contrary to the statement in Judge O’Malley’s separate opinion, nothing in this opinion rejects the application of the doctrine ofinequitable conduct (or “unclean hands”) as applied to other forms of misconduct, in litigation or otherwise. This case deals withthe consequences of nondisclosure in violation of the duty of disclosure imposed by the PTO’s Rule 56, and this opinion isdirected solely tothe role of the doctrine of inequitable conduct in that context.

C

The materiality standard set forth in Rule 56, as adopted in 1977 and refined in 1992, is not an idiosyncratic contrivance of

thePTO; quite the contrary, it is consistent with themateriality standard that is applied in a wide variety of other analogouscontexts. Although the relationship between the PTO and patent applicants is unusual in our law, it is nonetheless appropriate tolook to the way the concept of materiality is applied in other areas, as disclosure obligations and requirements of candor areimposed on parties in a wide variety of settings.

Securities law provides a particularly instructive analogy, as proxy issuers and corporate insiders often have access toinformation relevant to a stockholder’s decision that even the most diligent investor could not discover. Similarly, a patentapplicant is often in a better position than the examiner to know of relevant art or potentially invalidating circumstances,such asprior use. Notably, in the securities law context, a nondisclosure is typically regarded as material without the need to provereliance. Thus, for example, in the case of those who have an affirmative*1315

duty of disclosure to investors under thesecurities laws and who fail to comply with that duty, the Supreme Court has held that “positive proof of reliance is not aprerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor mighthave considered them important in the making of [the investment] decision.”Affiliated Ute Citizens v. United States,

U.S.––––, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011). In a passage that addressed concernssimilar to those raised in this case, the Court explained that it had adopted the “reasonable investor” standard to ensure thatinvestors would have access to information important to their investment decisions, while being “careful not to set too low astandard of materiality, for fear that management would bury the shareholders in an avalanche of trivial information.”Id.

Significantly, for our purposes, the Court added that the proper standard

does not require proof of a substantial likelihood that disclosure of the omitted fact would have caused the reasonableinvestor to change his vote. What the standard does contemplate is a showing of a substantial likelihood that, under all thecircumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.

Id.

Even in criminal proceedings that require proof ofmateriality, such as prosecutions under the federal mail and wire fraudstatutes,18 U.S.C. §§ 1341,1343, a “but for” test of materiality is not applied. Those laws penalize not only affirmativemisrepresentations, butalso the concealment of material facts.United States v. Olatunji,

872 F.2d 1161, 1167 (3d Cir.1989);United States v. O’Malley,

707 F.2d 1240, 1247 (11th Cir.1983). When a charge of mail or wire fraud is based on thenondisclosure of material information in violation of a duty to disclose, proof of

materiality does not require a showing of actualreliance on the part of the victim; all that is required is proof that the nondisclosure or concealment be capable of influencing theintended victim.SeeNeder v. United States,

(nondisclosed relationship between mayor and purchaser of city propertywas material “even if the relationship would not have per se barred [the purchase].”);United States v. Szur,

289 F.3d 200,211–12 (2d Cir.2002)

(securities broker owed duty to customers to disclose that broker would earn “exorbitant” commission ontrades; such information was material for the purpose of the wire fraud statute because it would have been “relevant to acustomer’s decision to purchase the stock”);United States v. Bronston,

658 F.2d

920, 926 (2d Cir.1981)

(concealment ofinformation that defendant is under a duty to disclose is material if the nondisclosure “could or does result in harm” to the

victim).

The same principles have been applied to nondisclosures of material information*1316

in civil matters, even civil matters thathave been regarded as having grave personal consequences. In a denaturalization proceeding, for example, a “concealment ormisrepresentation” made in the course of the naturalization process is considered “material” under8U.S.C. § 1427(a)

if it has“a natural tendency to influence the decisions of the Immigration and Naturalization Service”; it is not necessary to show thatthe nondisclosure or misrepresentation in question actually had such an effect.SeeKungys v. United States,

485 U.S. 759, 772,108 S.Ct. 1537, 99

L.Ed.2d 839 (1988). The Supreme Court noted in that case that it “has never been the test of materiality thatthe misrepresentation or concealment wouldmore likely than not

have produced an erroneous decision, or even that it wouldmore likely than not

have triggered an investigation.”Id.

at 771,108 S.Ct. 1537

(emphasis in original).

Even with respect to the common law action for fraud, deceit, and misrepresentation, which is more exacting than the doctrine

of inequitable conduct, seeJ.P. Stevens & Co.,

747 F.2d at 1559,

the “but for” test does not apply to the element of materiality.In that setting, as the Restatement of Torts explains, a matter is material if “a reasonable man would attach importance to itsexistence or nonexistence in determining his choice of action,” or if the maker of the representation “knows or has reason toknow that its recipient regards or is likely to regard the matter as important in determining his choice of action.”Restatement(Second) of Torts

§ 538 (1977);seeNeder v. United States,

527 U.S. 1, 22 & n. 5, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999)

(citingthe Restatement as setting forth the materiality requirement for common-law fraud). In order for a material misrepresentation tosatisfy the causation requirement needed for an award of damages, it is necessary for the plaintiff to show reliance on themisrepresentation. However, the “but for” test does not apply even to tort actions for damages, as it is not necessary for theplaintiff to show “that he would not have acted or refrained from acting as he did unless he had relied on the representation.”Restatement (Second) of Torts

§ 546, cmt. b. In none of these settings has the test for materiality been set at the high “but for”level adopted by the majority in this case.4

4

The majority argues that the “but for”

test is applied in both copyright and trademark law to claims of fraudulent registration. To thecontrary, in the copyright context, courts have rejected the “but for” test in favor of a rule that a federal registration will beinvalidated if the claimant

willfully misstates or fails to state a fact that, if known, “might have

7.20 [B][1], at 7–212, 4(1) & n. 21 (rev. ed. 2010) (“If the claimant wilfullymisstates or fails to state a fact that, if known, might have caused the Copyright Office to reject the application, [it] may

be ruledinvalid.”) (citing numerous cases). In 2008, Congress adopted a “but for” test to govern the effect of errors on the right to bring acivil action and the right to heightened remedies,see

17 U.S.C. § 411 (Supp. III 2009), but that provision was not made applicable tothe presumption of copyright validity set forth in17 U.S.C. § 410(c), which remains subject to the pre–2008 standards.See

As for trademarks, it is true that in deciding whether fraud on the PTO will result in the cancellation of a mark on the federalregister, courts apply a “but for” test of materiality.See, e.g.,Orient Express Trading Co. v. Federated Dep’t Stores, Inc.,

842F.2d 650, 653 (2d Cir.1988)

(defining material fact as “one that would have affected the PTO’s action on the applications”);Citibank, N.A. v.Citibanc Grp., Inc.,

724 F.2d 1540, 1544 (11th Cir.1984)

(requiring “false, material statement by the plaintiff ofa fact that would have constituted grounds for denial of the registration had the truth been known.”). As the author of the leadingtreatiseon trademark law has pointed out, however, cancellation of a mark from the federal register does not extinguish thetrademark rights of the mark’s owner or defeat the owner’s right to sue infringers.6 J. Thomas McCarthy,McCarthy onTrademarks and Unfair Competition

§ 31.60 (4th ed.2008).

Unlike the effect of a trademark registration, the issuance of a patent grants a right which, but for the examination and allowanceat the PTO, would not exist. For those reasons, as McCarthy has explained, the “standard of disclosure and hence of ‘fraud’ intheprocurement of federal trademark registrations should be, and is, quite different from that in patent procurement. The stringentstandard[s] of disclosure applicable to patent applications are ... not appropriate to applications for trademark registration.”Id.

at§ 31.65 (internal quotation and citation omitted).

*1317

The course charted by the majority is thus contrary to the Supreme Court decisions that gave rise to the doctrine ofinequitable conduct, to along line of our own precedent, and to the principles of materiality that courts have applied in othercontexts. Under this court’s new rule, an applicant who conceals information with the intent to deceive the PTO will be freetoenforce his patent unless

it can be proved by clear and convincing evidence that the patent would not have issued but for thefraud. Even though the majority justifies its new rule in part by asserting that it will improve the prosecution of patents beforethe PTO, I am convincedthat the new rule is likely to have an adverse impact on the PTO and the public at large, a viewthat—significantly—is shared by the PTO itself.

IV

The facts of this case, as found by the district court, illustrate why the materiality standard of Rule 56is a suitable test forinequitable conduct claims based on disclosure violations. A central issue during the examination that led to the issuance of

the′551 patent

was whether the prior art had taught that glucose sensors could be used to test whole blood without a protectivemembrane. The examiner focused onwhether the prior art ′382 patent

taught the use of sensors without membranes. On its face,the ′382 patent

seemed to teach that sensors could be used without membranes when testing whole blood because thespecification of the ′382 patent, when discussing the use of sensors with whole blood, stated the following:

Optionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and

themediator layers, permeable to water and glucose molecules.

′382 patent, col. 4, ll. 63–66. A central issue before the examiner was whether the use of the term “optionally” in that passageindicated that it was possible to use the sensors in whole (or live) blood without a protective membrane.

The districtcourt found that the persons involved in prosecuting the ′551 application, Abbott’s attorney Lawrence Pope and itsexpert, Dr. Gordon Sanghera, made representations to the examiner that the pertinent passage in the ′382 patent

should not betaken at face value. In particular, Dr. Sanghera submitted a declaration in which he stated that even though the ′382 patent

referred to the use of a protective membrane surrounding the enzyme and mediator layers of the glucose meter as “optionally,but preferably” present, “one skilled in the art would have felt that an active electrode comprising an enzyme and a mediator

wouldrequire a protective membrane if it were to be used with a whole blood sample.” For that reason, he stated, he was “surethat one skilled in the art would not read [the ′382 patent] to teach that the use of a protective membrane with a whole bloodsample is optionally or merely preferred.”

Mr. Pope, the prosecuting attorney, added his own remarks*1318

when submittingDr. Sanghera’s declaration. He stated: “One skilled in the art would not have read the disclosure of the [′382 patent] as teachingthat the use of a protective membrane with whole blood samples was optional. He would not, especially in view of the workingexamples, have read the optionally, but preferably language ... as a technical teaching but rather mere patent phraseology.”Mr.Pope added: “There is no teaching or suggestion of unprotected active electrodes for use with whole blood specimens in [the′382] patent or the other prior art of record in this application.” Shortly after those submissions were made, the examinerallowed the claims for a membraneless sensor.

The problem, the district court found, is that Abbott had made directly contradictory representations to the European PatentOffice (“EPO”) concerning the teaching of the ′382 patent

in connection with the prosecution of a European patent applicationand had not disclosed those contradictory representations to the PTO. Before the EPO, Abbott represented that the Europeancounterpart to the ′382 patent

referred to a “protective membrane optionally utilized with the glucose sensor of the patent,” andthat the membrane was “preferably to be used with in vivo measurements.” With specific reference to the language from thepatent reciting the use of the protective membrane “optionally, but preferably when being used on live blood,” Abbott told theEPO: “It is submitted that this disclosure is unequivocally clear. The protective membrane is optional, however, it is preferredwhen used on live blood in order to prevent the larger constituents of the blood, in particular erythrocytes from interfering withthe electrode sensor.”

The district court found that Abbott’s representations to the EPO contradicted its representations to the PTO, made through Dr.Sanghera and Mr. Pope. The court’s finding on that issue, made after a detailed analysis of the representations to the two bodies,cannot be held to be clearly erroneous. The district court also found that Abbott’s failure to disclose to the examiner thatit hadmade inconsistent statementsto the EPO regarding the teaching of the ′382 patent

was

highly material. In particular, the courtfound that the failure to disclose the inconsistency in those statements was the kind of nondisclosure covered by PTO Rule 56,as being nondisclosure of information “inconsistent with a position the applicant takes in ... [a]sserting an argument ofpatentability.” That finding, too, cannot be regarded as clearly erroneous in light of the central role of the pertinent portion ofthe ′382 patent

in the examination of the application that led to the issuance of the ′551 patent.

Turning to the issue of intent, the district court found that Abbott’s failure to disclose materialinformation was intentional, i.e.,it was made with the specific intent to deceive the PTO. The district court heard live testimony from Mr. Pope and Dr. Sangheraand conducted a detailed analysis of their testimony in light of the record. Based on that analysis, the court concluded that theirefforts to justify their conduct were unpersuasive. The court found that Mr. Pope and Dr. Sanghera were aware of the contrary

representations made to the EPO and consciously chose to withhold them from the PTO. The court carefully considered theirexplanations for their failure to disclose the references and found each witness’s explanation to be lacking. The courtdiscredited Mr. Pope’s explanation that he understood the term “unequivocally clear” in the EPO submission to relate to thepermeability of the membrane, not to the text immediately following the words “unequivocally clear,” where it is plainly statedthat the membrane is optional. The court was*1319

not persuaded by Mr. Pope’s statement that he believed “optionally, butpreferably” meant, in the context of patents, “optionally, but always.”

The court then considered possible alternative reasons for Mr. Pope’s decision not to disclose the contradictory EPOstatements, such as the possibility that Mr. Pope had

misunderstood the meaning of the terms “whole blood” and “live blood.”Ultimately, however, the district court could identify no plausible reason for the nondisclosure and therefore found that Mr.

Pope had acted with deceptive intent. That finding, basedon the court’s consideration of Mr. Pope’s demeanor and overallcredibility, as well as the court’s analysis of the record as a whole, cannot be said to be clearly erroneous.

For similar reasons, the court found that Dr. Sanghera also acted with intent todeceive the PTO. The court considered andrejected the possibility that Dr. Sanghera believed that Mr. Pope, Abbott’s counsel before the PTO, would disclose the materialinformation. The court began by finding that Dr. Sanghera’s declaration before the PTO

contained representations that weremisleading by omission. The court explained that finding as follows:

He did not have to take this extra step. Having done so, he was obligated to avoid intentional deception. His sworn statementsto the PTO about the meaning of the “optionally but preferably” sentence were known by him to be inconsistent with his owncompany’s statements to the EPO—statements he had himself helped craft.

As to Dr. Sanghera’s testimony that he believed that statements he made to the PTO did not contradict the statements made tothe EPO, the court found that Dr. Sanghera knew that a representation had been made to the EPO that the ′326 patent did notrequire

a membrane when used with whole blood. Noting that Dr. Sanghera’s trial testimony had been impeached by his priorinconsistent statements on certain points, and finding that Dr. Sanghera exhibited an “unconvincing trial demeanor,” the districtcourt found

that he acted with the requisite intent to deceive. As in the case of Mr. Pope, the district court’s findings as to Dr.Sanghera are not clearly erroneous.

Viewed in light of the district court’s findings, this case is a compelling one for applying the principles of inequitable conduct.The district court found that Abbott’s representatives deliberately withheld material from the PTO that directly refuted Abbott’sASD

contention that one skilled in the art would have believed that the ′382 patent

taught that a membrane was required for wholeblood analysis. Abbott’s inconsistent position on the teachings of this critical reference falls squarely within the scope ofinformation of the sort referred to in PTO Rule 56(b)(2), i.e., information that “refutes, or is inconsistent with, a position theapplicant takes in ...

[a]sserting an argument of patentability.” Given the examiner’s focus on the issue of whether the protectivemembrane in the prior art patent was optional or not, the issue was of critical importance in the prosecution of the applicationthat issued as the ′551 patent, even though the undisclosed information,if revealed, may not have resulted in the rejection of theclaims at issue. Accordingly, the district court made all the findings necessary to support its holding that the ′551 patent

wasunenforceable for inequitable conduct.5

Because*1320

the district court’s factual findings are not clearly erroneous andbecause its legal analysis comports with the proper role of the doctrine of inequitable conduct in patent law, the district court’sjudgment that the ′551 patent

is unenforceable for inequitable conduct should be affirmed.

5

Understandably relying on this court’s prior case law, the district court stated at one point that Mr. Pope “knew or should haveknown” that the withheld information would have been highly material to the examiner, and at another point the court referred to“balancing the levels of materiality and intent.” Although those remarks suggest a looser standard than that advocated here,they donot undermine the district court’s ruling on inequitable conduct, because the district court elsewhere made findings that clearlysatisfied the requirements of the more restrictive standard for inequitable conduct set forth above. In particular, the court

found thatMr. Pope “acted with specific intent to deceive Examiner Shay and the PTO,” that Mr. Pope and Dr. Sanghera “made a consciousand deliberate decision to withhold disclosure to the PTO of these prior statements” to the EPO, and that both of them “knewthat theEPO materials made affirmative statements inconsistent with the declaration and the attorney remarks [to the PTO].” With respectto Dr. Sanghera, the court found that he “consciously made sworn statements to the [PTO] that were deliberately misleading.”Withrespect to the issue of “balancing,” moreover, the district judge

did not find it necessary to balance intent against materiality,because he explicitly found that the evidence was strong as to both materiality and intent.